Decimal Investments (Private) Limited v Arundel Village (Private) Limited and Angelbert G.M. Nyandoro

### Preamble
1
HH 262-12
HC 12172/11
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DECIMAL INVESTMENTS (PRIVATE) LIMITED

versus

ARUNDEL VILLAGE (PRIVATE) LIMITED

and

ANGELBERT G.M. NYANDORO

HIGH COURT OF ZIMBABWE

MATHONSI J

HARARE, 13 June 2012 & 27 June 2012

Opposed Application

R.M. Mushoriwa, for the applicant

S. Takundwa, for the 1st respondent

2nd respondent in default

MATHONSI J:  The applicant is a tenant occupying premises known as Ground Floor, Building 3 at Arundel Office Park, Mount Pleasant Harare by virtue of a lease agreement entered into with the respondent.  When a rent dispute arose between the parties, it was referred to arbitration in terms of clause 34 of the written lease agreement of the parties, through the President of The Real Estate of Zimbabwe, who appointed the second respondent as arbitrator.

Clause 34 of the lease agreement provides in relevant part as follows:-

“34.5 		The Arbitrator shall be entitled, in his sole and absolute

discretion;

34.5.1. 	to decide whether any party or any other person who might be of  assistance to the Arbitrator shall be invited or permitted to give evidence or make oral submissions;

34.5.2.	to decide the extent to which or the topics on which such person shall give such evidence or make such submissions

34.5.3.	to make his own enquiries into any aspect of the dispute and to rely upon the results thereof; and

34.5.4.	to rely upon his own expertise and judgment in reaching his decision .

34.6	………

34.7	………..

34.8	The decision of the Arbitrator shall be final and binding upon the parties hereto  and either party shall be entitled to have the decision registered with the High Court of Zimbabwe as an Order of that Court” (The underlining is mine).

Following submissions made by both the applicant and the first

respondent, the second respondent issued an arbitral award in terms of which he set the rentals for the leased premises at US$15-00 per square metre for January to June 2011 and US$20-00 per square metre for July to December 2011. The applicant was not happy with that award and it made this application in terms of Article 34(2) of the Arbitration Act [Cap 7:15] for the setting aside of the arbitral award on the basis that it offends public policy.

Article 34(2)(b) of the model law in the Arbitration Act provides:

“An arbitral award may be set aside by the High Court only if the High Court finds, that:-

The subject matter of the dispute is not capable of settlement by arbitration under the law of Zimbabwe, or

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

Article 34(5) goes on to say:

“For the avoidance of doubt, and without limiting the generality 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 or corruption; or

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

In its founding affidavit deposed to by its Company Secretary, Lawrence

Bhebhe, the applicant argued that the award was in conflict with the public policy of Zimbabwe in that there was a breach of the audi alteram partem rule because, although it was given an opportunity to be heard, its submissions were rejected by the arbitrator in favour of those of the first respondent.

It is further argued that not only was the second respondent biased, he also had an interest in the cause given that he is an estate agent himself and therefore benefits from high rentals in the form of commission.

Finally, the applicant argued that it was also contrary to public policy to increase rentals by such a large margin which brings back memories of hyper- inflation during the Zimbabwe Dollar era.

The second respondent submitted an opposing affidavit in which he stated at para 3 thus:

“It is clear from the lease agreement that I was being so appointed as a valuer on account of my knowledge and experience in the real estate business I was coming in as an independent person, a valuer as demanded by clause 34.2 of the lease agreement between the parties”.

The second respondent pointed out that he approached the matter impartially desirous to resolve the dispute and for that reason he passed on whatever information he obtained from one party to the other for comments. He stated at para 16 to 19 as follows: -

“16.	 All the parties indicated an interest in a site visit and discussions at the site revealed the similarity of the premises in terms of location construction, finishes, services and facilities management.

17.	I invited and received submissions on comparables from the parties. This is apparent from my determination which is again attached to the application

18.	In the result I made a rental determination based on the comparables and reasonableness of the submissions of the parties. The counter offer by the applicant was below what he had submitted as established comparables. This was so despite the admission by Old Mutual Properties that their rentals were below the market.

19.	Regarding the issues of conflict with the public policy of the country and rules of natural justice cited as reasons for setting aside the award, I insist that the award and the process leading up to it were not against public policy. The applicant is asking this court to determine what is a reasonable rent which is not the mandate given to it in terms of the Arbitration Act. However it would be of interest to note that the majority occupants of the same premises in terms of location, construction, finishes, services and facilities agreed to pay more per square metre and only the applicant disagreed for personal reasons of affordability rather than open market rent”.

In his address to the court Mr Mushoriwa for the applicant strongly

argued that the second respondent violated a cardinal principle of natural justice, the audi et alteram partem rule which requires a tribunal to hear the other side in that, while he gave the applicant the opportunity to make submissions, everything submitted by the applicant, including samples of comparable rentals, was summarily and unjustifiably dismissed

I do not agree. The applicant was accorded a right to make submissions. The arbitral award shows that the arbitrator considered the submissions by both parties and came to the conclusion that the applicant’s own submissions did not find favour with him especially as it relied on, not only Old Mutual Properties rates which were below the market, but also because the applicant offered to pay rent which was even below the Old Mutual Properties rates it relied upon.

A tribunal does not infringe upon the audi alteram partem rule by rejecting the story of one party in favour of that of its opponent. The rule connotes that both parties must be heard before a decision is taken. Where, in considering the submissions of the parties the tribunal favours those of one of the parties for reasons that it gives, in my view there is full compliance with the rule. To hold otherwise would lead to an absurdity. The arbitrator explained why he rejected the applicant’s submissions, namely that the applicant relied on below market rates.

That conclusion may have been wrong, but that does not equate to a breach of the audi alteram partem rule. It certainly does not entitle this court to interfere with the award.

Mr Mushoriwa submitted further that the second respondent was biased because he failed to consider the applicant submissions and that the decision was not based on fairness and justice. The fallacy of that argument is self-evident. Apart from the fact that it is apparent from the award that the second respondent considered and rejected the applicant’s submissions, nothing has been put forward as being indicative of lack of fairness and justice. Proceedings and indeed an award cannot be unfair merely because the outcome is not favourable to the applicant.

The claim that the second respondent had an interest in the cause has also not been proved. I agree with the second respondent that he was appointed for his expertise. The applicant cannot say that a valuer has an interest in the cause merely because he gets more commission from high rentals without showing how this would benefit the second respondent. It is one of many gratuitous and liberal accusations that have not been substantiated.

I find myself in total agreement with the pronouncement of GILLESPIE J in Trinity Engineering (Pvt) Ltd v Commercial Bank of Zimbabwe Ltd 2000(2) ZLR 385 at 387 C-D where he said:-

“No such allegation of bias can be supported. The allegation really amounts to no more that the argument ‘because he found against me, and because he was critical of me even in pejorative terms, he must be biased’. That sort of argument is not convincing – rather than justify an inference of bias it does little more than demonstrate its own circularity. In order for there to be any justification in the inference drawn, it would have to be shown that the decision was so outrageous that it could only be explained on the assumption of bias. Anything else amounts to no more than saying, ‘he is biased against me but his adverse decision is admittedly correct’”.

The mere fact that a finding is made against one party does not cause a

reasonable litigant, to apprehend bias.

It was further argued on behalf of the applicant that the size of the rent increase awarded by the second respondent is unconscionable as to induce a sense of shock and that the increase benefits elitist estate agents and militates against legitimate businesses forcing them to overprice their goods and services. For that reason it is against public policy.

I agree with Mr Takundwa for the respondent that the locus classicus on the subject is Zesa v Maposa 1999(2) ZLR 452(S) where at 466 E-G GUBBAY CJ said:

“Under articles 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. 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”.

See also Delta Operations v Origen Corp (Pvt) Ltd 2007(2) ZLR 81(S)

85 C-D.

Can it be said that the award qualifies to be against public policy applying the law set out above. I do not think so. We have a situation where the contestants placed before the arbitrator evidence that comparable rentals for upmarket premises like the one in dispute ranged between US$9-00 per square metre and US$20-00 per square metre. The applicant was rooting for an increase of 2,5% arguing that the average rentals in its comparable properties was US$10-50 per square metre.

The arbitrator entertained the submissions of the parties, conducted a site visit, established that the majority of tenants at the premises accepted more than US$15-00 per square metre as reasonable rental and relying “upon his own expertise and judgment” and “in his sole and absolute discretion” given to him by clause 34 of the lease agreement between the parties, made an award. I agree with Mr Takundwa that the award is not of earthshaking magnitude as to be classified as intolerable.

It should be appreciated that the limited grounds of attacking an arbitral award are meant to ensure international uniformity in the application of the model law contained in the Arbitration Act. That law is of international origin and is intended to govern both domestic and international arbitrations. Pamire & Ors v Dumbutshena N.O. & Anor 2001(1) ZLR 123(H) at 125 E. I therefore do not agree with Mr Mushoriwa that the award should be looked at having regard to the memories of hyperinflation during the Zimbabwe Dollar era.

What we have is an award which took into account the perceptions of the market at the time and the ability of other tenants to pay. It cannot be said that such an award results in the conception of justice in this country being “intolerably hurt”.

I therefore come to the inescapable conclusion that the application is without merit and cannot succeed.

The first respondent has asked for costs on the legal practitioner and client scale on the basis that the application is mala fide. It has not explained why the application is mala fide. I do not agree that the applicant should be visited with punitive costs because, although its submissions were emotive and full of fury, there was substance in the arguments which however fell short of meeting the requirements of the law.

In the result, the application is dismissed with costs on the ordinary scale.

Mawere & Sibanda, applicant legal practitioners

S. Takundwa & Co, respondent’s legal practitioners