Chawara Syndicate v Pickwerl Mining (Private) Limited & Anor

### Preamble
Judgment No. SC 93/19
1
Civil Appeal No. SC 403/17
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DISTRIBUTABLE	(87)

CHAWARA     SYNDICATE

v

PICKWERL     MINING     (PRIVATE)     LIMITED

(2)      MOSES     CHINHENGO     N.O.

SUPREME COURT OF ZIMBABWE

GOWORA JA, GUVAVA JA & MAVANGIRA JA

HARARE, MARCH 20, 2018 & NOVEMBER 21, 2019

J. Wood, for the appellant

T. Mpofu, for the first respondent

No appearance for the second respondent

MAVANGIRA JA:	This is an appeal against the whole judgment of the High Court setting aside an arbitral award issued by the second respondent, for the reason that it was contrary to public policy.

I proceed to set out the factual background to this appeal.

The appellant, Chawara Syndicate was made up of three commercial farmers, Mark Hook, Dennis Martin and Kurt Braunstein.  The three farms belonging to the three men were adjacent to each other. A dam was constructed on the three farms in the 1990’s and called the Chawara Dam.

The three farms belonging to the syndicate’s members were compulsorily acquired by the State in 2001 under the Land Reform programme in terms of the Land Acquisition Act [Chapter 20:10].  Two of the men vacated their farms but Mark Hook (Hook) remained in occupation of a portion of his farm. From the time of acquisition, new settlers have been in occupation of the farms classified under A1 and A2 farms. Occupation on those farms was formalized sometime around 2013 and or 2014.

The first respondent operates a gold mine called Muriel Mine which is some 5 kilometers from Hook’s farm.  At some point Muriel Mine obtained from the Zimbabwe National Water Authority (ZINWA) a twenty (20) year water right on Chawara Dam for it to abstract water therefrom.

In July 2005 the first respondent and the appellant entered into an agreement in terms of which the first respondent undertook to pay the appellant US$3 000 per month for the duration of the agreement between the first respondent and ZINWA or for fifteen (15) years whichever was lesser. The payment was meant to be reimbursement for the expenses incurred in the construction of the dam wall as well as in recognition of the investment made by the appellant. It was also for the benefit that the first respondent was deriving from abstracting water from the dam and for the use of the pump house belonging to one of the Syndicate members. In terms of the agreement the first respondent had preferential use of the dam at all times.

The first respondent duly made the monthly payments in terms of the agreement until 2009. The invoices of the payment reflected the payments as being made by Pan African Mining (Pvt) Ltd. It later emerged that the first respondent was a fully owned non-trading subsidiary of Pan African Mining (Pvt) Ltd. In November 2009 Hook was advised that Pan African Mining had been sold to new shareholders. He was advised that the new owners wanted to abide by the terms of the same agreement, which terms would have to be incorporated in a new agreement.

A new agreement was drafted on the same terms as the first one and between the same parties but it was not signed. However payments continued until April 2011 after which no further payments were made to the appellant.

The appellant’s legal practitioners wrote to the first respondent in August 2012 concerning alleged breach due to non-payment of the agreed monthly payments and claiming payment of the arrears.

In his heads of argument Mr Mpofu for the first respondent, submitted that the monthly payments were stopped when it became clear that the contract was illegal and had no basis. The first respondent felt that it had no obligation to pay the Syndicate and that its obligation was to ZINWA only. He submitted that this was communicated to the appellant who then referred the matter for arbitration in terms of the agreement.

In the statement of claim the appellant sought an award in the following terms:

Payment of US$111 000 (one hundred and eleven thousand United States dollars);

A declarator that the Respondent (first respondent in the present proceedings) owes Claimant US$3 000 (three thousand United States dollars) per month;

Interest at the prescribed rate on US$111 000 (one hundred and eleven thousand United States dollars) from  28  August 2012;

Costs on a legal practitioner/client scale.

The first respondent filed an exception to the statement of claim on the basis that the appellant’s claim did not disclose a cause of action. This was based on the view that whilst the appellant alleged that it had entered into the agreement and had negotiated it with an official from Pan African Mining (Pvt) Ltd, the said company was not cited in the papers. The second respondent, a former Judge of the High Court of Zimbabwe who was the arbitrator, upheld the exception in July 2014 and allowed the appellant to amend its claim.

The parties led evidence before the arbitrator. During cross examination Hook accepted that he had made a claim against the government for infrastructural development and the construction of the dam would be part of the infrastructural developments. Hook also indicated that the other members of the syndicate were not aware of the proceedings that he had instituted and were therefore not part of the proceedings. He further stated that the purpose of the contract was to compensate for the construction of the dam wall.

The arbitrator ruled in favour of the appellant on 5 December 2015. He accepted that any continued occupation of acquired land was illegal. However, he found that the first respondent had entered into the agreement post acquisition and as such it had undertaken to pay compensation even though it had no duty to do so. The arbitrator ruled that the contract was entered into by parties in the full knowledge of the fact that the farms belonging to the Syndicate members had been acquired by the State under the Land Reform Programme, that the State would compensate the syndicate members for improvements on the farms and that the syndicate no longer had title to the land or any other right whatsoever.

The arbitrator found that even after change of ownership, the first respondent continued to make payments in terms of the contract. He found that the contracts were freely entered into and had to be accordingly enforced and that the first respondent was liable to pay the amounts claimed. He also found that the appellant was entitled to the declaration that it sought.

On 1 March 2016 the first respondent filed a court application in the High Court in terms of Article 34(2)(b)(ii) of the Arbitration Act [Chapter 7:15] for the setting aside of the arbitral award on the basis that it was contrary to public policy. The first respondent argued that the award was patently contrary to public policy, that it rewarded a criminal enterprise and enforced an agreement which by all accounts was void.

The appellant opposed the application. It argued that the award was not contrary to public policy since it was based on a contract entered into by the parties and the first respondent’s subsequent breach of the terms of the said contract. The appellant then made an application for registration of the arbitral award under case number HC 5936/16, which application was consolidated with the application for the setting aside of the arbitral award.

In the court a quo Mr Mpofu submitted that the land on which the dam was situated had been acquired by the state and thus the appellant no longer owned both the land and the dam. He further submitted that it is a principle of elementary law that a dam accedes to the land on which it is situate. The appellant could thus not retain any rights in the land and Hook’s occupation of the farm was unlawful. The agreement having been entered into after the acquisition of the land by the State, the land at that stage belonged to the State and not to the appellant. The State as the new owner of the land had to compensate the appellant. He further submitted that the award was contrary to the Constitution of Zimbabwe and contrary to public policy as it subverted a constitutional process.

Mrs Wood for the appellant, on the other hand submitted that the appellant’s occupation of the land in question is lawful because he was never charged with contravention of the Gazetted Land (Consequential Provisions) Act [Chapter 20:28]. She argued that the issue of unlawful occupation of the property was irrelevant as the contract between the parties was for reimbursement of costs to pay for the dam wall. She further submitted that if any person wanted to take over the obligation of the State to pay compensation there was nothing illegal about such an arrangement. Furthermore, that the parties having entered into a binding agreement after acquisition of the said land, there can be no infringement of the Gazetted Lands (Consequential Provisions) Act.

The High Court made the following order:

“Accordingly, it is ordered that:

The arbitral award dated 05 December 2015 rendered by second respondent in the matter between Chawara Syndicate and Pickwerl Mining (Private) Limited be and is hereby set aside.

The counter application for registration of the arbitral award in HC 5936/16 is dismissed.

Costs of this application shall be borne by the first respondent.”

THIS APPEAL

The appellant has now appealed to this Court. The grounds of appeal are as follows:

That the court erred in finding that Mr Hook’s personal circumstances had a bearing on this matter alternatively erred in finding that he did not deserve the protection of the law.

That the court a quo erred in finding, in effect, that the appellant was claiming rights over the land in question in seeking to enforce its contract with the first respondent.

The court a quo erred in finding that the appellant, which consisted of three persons, two of whom had vacated the acquired land, was engaged in a criminal enterprise.

The court a quo erred in effect that-

the appellant was making use of, or seeking to benefit from, the acquired land in entering into the contract with the first respondent;

accordingly, erred in finding that the learned arbitrator, in upholding the said

contract, was giving effect to the appellant’s use of the acquired land.

The court a quo erred in finding that the contract between the appellant and the first respondent was illegal.

The court a quo erred in finding that the arbitral award endorsed a criminal act.

The court a quo erred in finding that the learned arbitrator erred in ordering the first respondent to compensate the appellant because the state was liable for compensating it.

The court a quo erred in finding that, in terms of the Constitution, the appellant was not entitled to compensation from the state for improvements to the acquired land.

At the onset of proceedings, Mr Mpofu raised objections relating to the appellant’s prayer in the notice of appeal stating that the prayer was far from being concise. He submitted that the prayer had to incorporate the terms of the draft order as opposed to merely making reference to the draft order.

In response Mrs Wood made an oral application to amend the prayer in the notice of appeal so that it reads the same with the draft order that was annexed to the application for registration of the arbitral award. Mr Mpofu indicated that he was not opposed the application to amend the prayer. The court thus allowed the appellant’s application to amend the prayer in the notice of appeal.

ISSUES FOR DETERMINATION

The major issue for determination is whether the arbitral award was contrary to public policy. However, for a proper determination the following issues need to be addressed:

Whether a party whose land has been acquired by the State in terms of the Land Acquisition Act and who remains in occupation of that land can still seek protection of the law.

Whether a party whose land has been acquired by the State can enter into a contract with a third party concerning compensation for improvements on the said land.

Whether a party whose land has been acquired by the state in terms of the Land Acquisition Act can still remain in occupation of that land and seek protection of the law.

Section 72(6) of the Constitution of Zimbabwe (No.20) Act 2013 states that an Act of Parliament may make it an offence for any person, without lawful authority, to possess or occupy agricultural land referred to in this section or other State land.

Section 3 of the Gazetted Lands (Consequential Provisions) Act then reads as follows;

Occupation of Gazetted land without lawful authority

(1) 	Subject to this section, no person may hold, use or occupy Gazetted land without lawful authority.

(2) 	Every former owner or occupier of Gazetted land—

(a) referred to in paragraph (a) of the definition of “Gazetted land” in section 2(1), shall cease to occupy, hold or use that land forty-five days after the fixed date, unless the owner or occupier is lawfully authorised to occupy, hold or use that land;

(b) referred to in paragraph (b) of the definition of “Gazetted land” in section 2(1), shall cease to occupy, hold or use that land forty-five days after the date when the land is identified in accordance with section 16B(2)(a)(iii) of the Constitution, unless the owner or occupier is lawfully authorised to occupy, hold or use that land:

Provided that—

(i) 	the owner or occupier of that land referred to in paragraph (b) may remain in occupation of his or her living quarters on that land for a period of not more than ninety days after the date when the land is identified;

(ii)	 the owner or occupier shall cease to occupy his or her living quarters after the period referred to in proviso (i).

(3) 	If a former owner or occupier of Gazetted land who is not lawfully authorised to occupy, hold or use that land does not cease to occupy, hold or use that land after the expiry of the appropriate period referred to in subsection (2)(a) or (b), or, in the case of a former owner or occupier referred to in section 2(b), does not cease to occupy his or her living quarters in contravention of proviso (ii) to section 2(b), he or she shall be guilty of an offence and liable to a fine not exceeding level seven or to imprisonment for a period not exceeding two years or to both such fine and such imprisonment.

(4) 	Any person, other than a person referred to in subsection (2), who contravenes subsection (1), shall be guilty of an offence and liable to a fine not exceeding level seven or imprisonment for a period not exceeding two years or to both such fine and such imprisonment.

(5) 	A court which has convicted a person of an offence in terms of subsection (3) or (4) shall issue an order to evict the person convicted from the land to which the offence relates. (my emphasis).

The Gazetted Land (Consequential Provisions) Act makes it an offence for persons without lawful authority to possess or occupy gazetted land. Section 3 (2) is worded in peremptory terms. Following the gazetting of a specific piece of land, it is peremptory for the occupier to cease to occupy, hold or use that land forty-days after the fixed date. A reading of sub ss 3 and 4 shows that failure to cease occupation and use of gazetted land is a criminal offence in Zimbabwe.

To the fore comes Mrs Wood’s submission in the court a quo as well as before this Court that the appellant’s occupation of the land in question is lawful because he was never charged with contravening the Gazetted Land (Consequential Provisions) Act. She further submitted that two of the farmers belonging to the syndicate were no longer in occupation of the land and so the syndicate could not be said to be committing an offence as one member remained on a portion of the land over and for which no one has been given an offer letter.

It goes without saying that all citizens must abide by the law of the land. The appellant had to comply with the law despite not being first charged and prosecuted for contravening the said Act. The fact that he was not prosecuted does not mean that his continued occupation and use of the gazetted land was or is lawful.

In Commercial Farmers Union & Ors v Minister of Lands & Rural Settlement & Ors 2010 (1) ZLR 576 (S) 586G-H, CHIDYAUSIKU CJ had this to say,

“In terms of s 16B of the Constitution, the individual applicants have been stripped of all the rights to the land they previously owned or occupied. Section 16B of the Constitution vests all the rights of previous owners and occupiers in the State.   In casu, the only link the individual applicants have to the land is their continued occupation of the acquired land, which continued occupation has been rendered a criminal offence by an Act of Parliament authorised by s 16B(6) of the Constitution.”(my emphasis)

At 592C-E he further stated that,

“Section 3(5) of the Act does not confer on the individual applicants the right to remain in occupation until conviction… Section 3(5) of the Act confers on the criminal court jurisdiction to issue an eviction order and directs the presiding magistrate to exercise the power.   Thus a proper reading of s 3(5) of the Act simply confers certain jurisdiction on the presiding magistrate. It does not in any way confer on the individual applicants as previous owners or occupiers of acquired land the right to continue in occupation after the expiry of the prescribed periods.”(my emphasis).

The court a quo was thus correct in its determination that Hook’s continued occupation and use of the gazetted land was unlawful. It follows therefore, that the court could not assist a person in the position of the appellant who was conducting himself in contravention of the law. He is a former owner who remains in occupation of acquired land in open defiance of the law.

Section 70(6) of the Constitution of Zimbabwe Amendment (No.20) Act 2013 has similar provisions to s 16B (6) of the Constitution of Zimbabwe of 1980. The provisions allow an Act of Parliament to make it an offence for any person without lawful authority to possess or occupy acquired land. The provision was interpreted in Commercial Farmers Union & Ors v Minister of Lands & Rural Settlement & Ors (supra), in which it was stated that the previous occupant remains with no right whatsoever to the gazetted land. The same interpretation is applicable in the present matter. The result is that a party whose land has been acquired by the State in terms of the Land Acquisition Act cannot remain in occupation of that land and still seek the protection of the law.

2. Whether a party whose land has been acquired by the State can enter into a contract with a third party concerning compensation for improvements on the said land.

Having established that in terms of the law, the previous owner of gazetted land is stripped of all his rights thereto, the appellant’s capacity to conclude an agreement in terms of which it derives a right to be compensated for improvements thereon by the first respondent becomes highly questionable, if existent at all. No legal consequences or fruits can flow from or be given birth to by an illegality.

The contract between the appellant and the first respondent was a private agreement. In terms thereof the appellant extended rights and benefits to the first respondent. The agreement gave the first respondent preferential water rights in respect of Chawara dam, whilst in return the first respondent would make monthly payments in compensation of the appellant’s investment in the dam.

It is now settled that once the State has acquired any land, the previous owner loses all his rights in respect of the acquired land. The moment the land was acquired, the appellant automatically lost his right to conclude any private agreements arising out of that land, or any improvements he effected on that piece of land.

In Dube v Khumalo 1986 (2) ZLR 103(S) 109D GUBBAY JA (as he then was) stated the following:

“There are two rules which are of general application: The first is that an illegal agreement which has not yet been performed, either in whole or in part, will never be enforced. This rule is absolute and admits no exception. See Mathews v Rabinowitz 1948 (2) SA 876 (W) at 878; York Estates Ltd v Wareham 1950 (1) SA 125 (SR) at 128. It is expressed in the maxim ex turpi causa non oritur actio.”(the emphasis is added)

In Chioza v Siziba 2015 (1) ZLR 252 (S) 261C-F, ZIYAMBI JA in explaining the maxim stated:

“It is based on the principle, expressed variously, that the Court cannot aid a party to defeat the clear intention of an ordinance or statute; that Courts of justice cannot recognize and give validity to that which the legislature has declared shall be illegal and void; and that the courts will not permit to be done indirectly and obliquely what has expressly and directly been forbidden by the legislature.”

It is now established that an illegal agreement which has not yet been performed either in whole or in part will never be enforced by the court.  See also York Estates Ltd v Wareham 1950 (1) SA 125 at p 128 where LEWIS ACJ, said:-

“The Court has no equitable jurisdiction to grant relief to a plaintiff seeking to enforce a contract prohibited by law. See Matthews v Rabinowitz 1948 (2) SALR 876 W.L.D.  In fact the Court is bound to refuse to enforce a contract which is illegal even though no objection to the legality of the contract is raised by the parties.  CAPE DAIRY and GENERAL LIVESTOCK AUCTIONEERS v SIM (supra).”

The arbitrator found that the agreement was a nullity. Therefore there was no valid basis for the arbitrator to order the first respondent to compensate the appellant in terms of the agreement. Specific performance in terms of the agreement is also rendered impossible as the appellant had lost all its rights by operation of law through the acquisition of the land.

Upon acquisition of his farm, Hook lost all rights to enter into private agreements concerning the dam which acceded to the farm as he was no longer the owner of the acquired land. Agreements entered into by the previous owner without the authority of the State as the new owner are illegal.

This disposes of the third, fifth, sixth and seventh grounds of appeal. This is because the continued occupation of a portion of the farm by Hook was a criminal offence and as such nothing could legally flow from his illegal occupation.

It seems to me that the eighth ground of appeal raises an irrelevant issue. This is so in view of the fact that the dispute between the parties emanated from a contract that they entered into. The State was not a party and was not in any way involved. As such the issue of the State’s obligation to pay compensation is not relevant as far as issues emanating from the contract are concerned. The crux of the matter revolves around the first respondent’s obligation to compensate the appellant.

The appellant’s approach to the State for compensation for the improvements on the land, including the specific improvement that is the subject of the agreement, would be in accordance with the law. However, seeking payments from the first respondent emanating from an agreement premised on compensation cannot be and is not countenanced by the law. The appellant, it seems, for undisclosed reasons, intended to benefit from both the State and the first respondent. That would amount to double compensation to the appellant in respect of the same subject or cause of action, being construction of the Chawara Dam on the farms belonging to the syndicate. Such a result would be repugnant to the law.

Whether the arbitral award was contrary to public policy

Having established that once land has been acquired by the State, the previous owner cannot continue to occupy the land and that the State as the new owner of the land becomes the beneficiary of all the rights emanating from the land, l now proceed to interrogate the aspect regarding whether the arbitral award made by the second respondent was contrary to public policy or not.

In terms of Article 34 (2)(b) (ii) of the Arbitration Act, the High Court can set aside an arbitral award if the award is in conflict with the public policy of Zimbabwe. Article 34 further states in para (5) as follows:

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

(a) 	the making of the award was induced or effected by fraud or corruption; or

(b)	a breach of the rules of natural justice occurred in connection with the making of the award.”

The concept of public policy has been explained in a number of cases. In the locus classicus ZESA v Maposa 1999 (2) ZLR 452 (S) at 466D-E, GUBBAY CJ as he then was stated that,

“The substantive effect of an award may also make it contrary to public policy. For example, an arbitral award which, after a consideration of the merits of the dispute, endorsed an agreement to break up a marriage, or the dealing in dangerous drugs or prostitution, on any view of the concept would be in conflict with the public policy of Zimbabwe….In my opinion, the approach to be adopted is to construe public policy defence, as being applicable to a foreign or domestic award, restrictively in order to preserve and recognize the basic objective of finality in all arbitrations; and to hold such defence applicable only if some fundamental principle of the law or morality is violated.”

The then Chief Justice proceeded to outline the test to be applied in determining whether an award is contrary to public policy at p466E-H in the following words:

“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.

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

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.”

In Peruke Investments v Willoughby’s Investments & Anor 2015 (1) ZLR 491 at 499 G-H (S) PATEL JA stated that “(A)s a rule, the courts are generally loath to invoke this ground except in most glaring instances of illogicality, injustice or moral turpitude.” See also Provincial Superior, Jesuit Province of Zimbabwe v Kamoto & Ors 2007 (2) ZLR 8 (S).

In the present case it has been established that a member of the appellant, Mark Hook remained in occupation of acquired land and that this is illegal in light of the Gazetted Land (Consequential Provisions) Act. An agreement by the appellant and first respondent endorsed criminal acts in that the appellant, who lost all his rights to the State upon acquisition, and is also in illegal occupation of the farm, sought to continue benefiting from the first respondent’s use of the dam on the farm.

The law is clear. Upon acquisition of land by the State, the previous owner of the land loses all his rights. All that the appellant would be entitled to is compensation from the State and not from any other person for the improvements made on the land. Following acquisition, the State becomes the new beneficiary of the land and it assumes the obligation to compensate for improvements effected by the previous owner as at the time of acquisition. The appellant had no right whatsoever to benefit from the dam on the acquired land without the State’s authority.

DISPOSITION

Although courts are not keen to pronounce an award to be contrary to public policy, l find that in this case the award falls into the class of the exceptions to this. The effect of the arbitral award issued by the second respondent was to allow the appellant, who was in illegal occupation, to derive benefit from acquired land and this is illegal. One can only derive benefit through the State, which is the holder of all rights emanating from that land.

The effect of the arbitral award cannot be countenanced.  It is for these reasons that this Court finds no misdirection in the court a quo’s determination that the award by the second respondent was contrary to public policy and that it endorsed criminal acts. The appeal fails. Costs will follow the cause.

Accordingly, it is ordered that the appeal be and is hereby dismissed with costs.

GOWORA JA:		I agree

GUVAVA JA:		I agree

Venturas & Samukange, appellant’s legal practitioners

Gill, Godlonton & Gerrans, 1st respondent’s legal practitioners