Shell Zimbabwe (Pvt) Ltd v Zimsa (Pvt) Ltd

### Preamble
HH 84-2007
HC 7448/06
SHELL ZIMBABWE (PVT) LTD
versus
ZIMSA (PVT) LTD
---------


============================== SHELL ZIMBABWE (PVT) LTD
versus
ZIMSA (PVT) LTD

HIGH COURT OF ZIMBABWE
MAKARAU JP
Harare 15 and 16 October and 28 November 2007.

Civil Cause

Adv W Ncube for plaintiff;
Mr M Kamdefwere for defendants.

MAKARAU JP: The material facts of this matter are to a large extent common cause. The parties however led evidence and I shall summarize this in due course.

It is common cause that the parties concluded a written agreement of lease in respect of Willowvale Service Station in Harare on 8 March 2006. Prior to that, the parties had concluded a similar agreement or similar agreements in respects of the same premises as the legal relationship between the parties commenced in or about 2000.

It was a specific term of the written agreement between the parties that the defendants as lessees would only accept delivery and sell products supplied to the service station by the plaintiff who in turn agreed and bound itself to supply the defendants with at least 75% of its requested deliveries of fuels, oils and lubricants. It was further provided that the lessee could receive and accept delivery of products from third parties upon certain terms and conditions and with the consent and knowledge of the plaintiff.

The condition restricting the receipt of third party products was known to the defendant’s employees especially one Simon Tirivangani, who, on or about 6 December 2006, accepted delivery from a third party without the defendants having first observed the procedures set out in the lease agreement.

Having failed to meaningfully engage the second defendant, who is the Managing director of the first defendant, the plaintiff issued summons out of this court on 30 November 2006, praying for an order evicting the first defendant from the leased premises and holding over damages from 1 December 2006 to date of eviction.

The defendants defended the matter on two fronts. Firstly, a special plea was filed requesting this court to refer the dispute between the parties to arbitration in terms of clause 14 of the agreement which provides for mediation in the first instance and for arbitration in the event that mediation fails. I shall refer to this clause in detail shortly. Regarding the merits of the matter, the defendants denied that there was a material breach of the lease agreement and in the alternative, that clause 7 of the lease agreement, providing for third party deliveries, is unduly oppressive and should not be enforced against the defendant in view of the prevailing situation where all fuels are scarcely available.

I revert to the point in *limine*. This is the special plea seeking to oust the jurisdiction of this court in favour of arbitration and based on clause 14 of the lease agreement between the parties.

Clause 14 of the agreement of lease provides as follows:

"14.1 Any dispute, question or differences arising at any time between the parties to this agreement out of or in regard to any matter arising out of or the rights and duties of the parties hereto, or the interpretation of or the rectification of this agreement shall in the first instance be submitted to and decided by mediation on notice given by either party to the other in terms of this clause.

14.2 such mediation shall be held in Zimbabwe and concluded, if possible within 7 days after it has been demanded.

14.3 In the event that mediation does not resolve the dispute within 7 days time period referred to in sub-clause (2) above, and the parties fail to agree on extended for mediation, then either party shall be entitled to refer the matter to arbitration, which shall be conducted in terms of the rules and procedures set out in the Arbitration Act of Zimbabwe.

14.4 .............

14.5 .............

14.6 ............." The issue that falls for determination is whether the above clause is an arbitration clause as provided for in the Arbitration Act. *Advocate Ncube* was of the firm view that it is not. His argument was simply that the clause did not put arbitration in the fore front but referred to it as a fall back position in the event that mediation failed.

In my view, it is important to determine whether the clause in the agreement between the parties is an arbitration clause as provided for in the Act because the Act provides in Article 8(1) of the Model Law as modified, which is set out in the Schedule to Act No. 6 of 1996, as follows:

"(1) 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 substance 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."

The interpretation of the above section was in my view, correctly rendered by SMITH J in *Waste Management Services v City Of Harare* 2000 (1) ZLR 172 (HC), where he held that where one of the parties to a dispute subject to an arbitration clause requests togo to arbitration, the court has no option but to stay proceedings and refer the matter to arbitration unless the court finds that the arbitration clause is null and void or inoperative or incapable of performance.

It is worth noting that prior to the amendment of the Arbitration Act in 1996, the court had a discretion to stay proceedings and refer the matter to arbitration. With the repeal of the old Act and its substitution with Act no 4 of 1996 adopting the UNCITRAL Model Law, the discretion of the court to stay proceedings has been modified as provided for in Article 8 cited above.

The jurisdiction of the court however remains intact. Arbitration is an alternative to litigation and cannot take away the inherent jurisdiction of this court.

The jurisprudential bases underlying the place and role of arbitration procedures in our law appear to me to be the apparent speed with which such procedures can yield results and the contractual autonomy of the parties not only to agree on the main obligations under the contract but on how to resolve differences that may occur between them as they perform their respective obligations under the contract.

While it is generally true that matters referred to arbitration are concluded faster than those that follow the litigation route, this is not the case in this matter and one would be forgiven for gaining the impression that arbitration is being raised as preliminary defence in this matter not to speed up the resolution of the dispute but to further delay it. In this regard, I have noted that since the issuance of summons in this matter, the defendant has not taken any steps to have the matter referred to arbitration and in my view, raises arbitration not to benefit from the renowned speed of the procedure but to stave off the judgment of this court.

It is the second jurisprudential basis of arbitration that concerns me most in this matter. This relates to the contractual autonomy of the parties to choose the method of resolving their differences under the agreement. This autonomy has been described as paramount in the arbitration regime in this jurisdiction and explains the respect with which arbitration awards are treated by the courts. It is however my view that this contractual autonomy on the part of the parties has to be viewed in the context of the inherent powers of the court to dispense justice to all who seek it from the court. Thus, in my view, while the court is bound to give effect to arbitration clauses in agreements, it is not bound to do so in circumstances where arbitration is not the expressed or implied first choice dispute resolution mechanism of the parties. The turning point in any such inquiry in my view ought to be the intention of the parties.

It is my further view that the parties in *casu* did not intend arbitration to be the first procedure to be resorted to in resolving differences arising from their lease agreement. They chose mediation in the first instance. It is therefore not out of place to suggest that this was an agreement subject to a mediation clause.

It is my finding that for an arbitration clause in an agreement to have the effect of staying court proceedings in terms of the Act, such clause must be clear and unequivocal and the parties must intend arbitration to be the procedure of first instance in resolving their disputes. In all other instances, the inherent power of the court to stay its own proceedings remains intact and the discretion rests with the court to stay proceedings or not.

Exercising my discretion in this matter, I take into account the delay that will further ensue in the matter were I to refer it to mediation to be followed by arbitration. I further take note of the fact that meetings between the parties prior to the issuance of summons failed to take place for one reason or another and that notwithstanding the mediation clause in the agreement, neither party chose that route to resolve the dispute between them. I therefore decline to stay proceedings in this matter.

I now turn to the merits of the matter.

As stated above, the facts giving rise to the dispute are largely common cause.

In dispute between the parties was whether the delivery of the third party fuel to the first defendant’s premises was in breach of the agreement between the parties. In their joint plea, the defendants denied that they had breached the lease agreement and argued that the delivery had been done to the first defendant in error. In the alternative, the defendants argued that the product from the third party had been sourced in substantial compliance with the terms of the lease agreement. (This defence was however not persisted with at the hearing.)

In support of its case, the plaintiff called three witnesses. These were Beverley Culverwell, Lewis Zulu and Tendai Muzanenhamo. Beverley Culverwell is the plaintiff’s retail manager and signed the agreement between the parties on behalf of the plaintiff she was responsible for ensuring that the lease was being complied with fully and it is in that capacity and on account of her responsibilities that Lewis Zulu telephoned her when he saw a third party vehicle decanting diesel at the defendant’s service station. After the event, the second defendant made efforts to communicate with the witness and was informed that there need be a formal meeting with witness’s superiors. A meeting was duly scheduled but a few minutes before, she received a message sent to her telephone by the second defendant that she could not make it to the meeting. The defendants were then advised that the plaintiff was terminating the lease agreement. No request was received by her to refer the matter to mediation or to arbitration.


I formed a favourable impression of the witness who gave he evidence clearly and with much confidence. She did not seek to exaggerate and readily conceded that the plaintiff was unable to supply the defendant with the requisite levels of products.

Lewis Zulu is the witness who actually witnessed the decanting of the third party diesel first. He then telephoned the last witness who requested him to remain on site while the area manager, Tendai Muzanenhamo was contacted. When Tendai arrived at the service station, together they carried out some investigations.

The evidence of this witness was necessarily short as it was largely common cause. I have no reason to discount any of his testimony.

The third witness to give evidence on behalf of the plaintiff was Tendai Muzananenhamo. His evidence was largely similar to that of Lewis Zulu. In addition, he testified that when he asked the defendant’s personnel on site about the delivery, he was given conflicting stories. One said it was meant for farmers under a special program while another said the fuel was destined for a service station across the road. After their investigations, the last two witnesses presented their findings to their superiors. A day after the delivery, he went to the service station and disabled the pumps to stop dispensation of fuel from the affected tanks. He took with him a fitter who removed some gadgets from the pumps. A few days later, he passed through the service station and saw the pumps working. The defendants were dispensing the product.

Again I have no reason to discount the evidence of this witness.

The second defendant gave evidence on her behalf and on behalf of the first defendant. She is the managing director of the first defendant.

The delivery of diesel that was made on 6 November 2006 was destined for another service station. One of her employees, by the name Simon, ho accepted the delivery without first consulting the witness. Simon was under instructions to only accept deliveries from the plaintiff. When she established that the delivery was for one Yves Kunaka, she advised this to the plaintiff through a letter.

In her experience, the plaintiff would collect penalties and handling charges if she received a third party product. They would not proceed to cancel the lease. She did not attend a meeting that was called for by the plaintiff as by the time she received the plaintiff’s letter inviting her to the meeting, she had already engaged legal practitioners who advised her not to attend the meeting as they would engage the plaintiff in dialogue.

The witness impressed me as a sharp and articulate business woman. She however contradicted herself in her evidence in one or two material respects. For instance while she initially testified that she was aware of the call for a meeting made by the plaintiff immediately after the decanting of the third party product, she later wanted to disclaim any knowledge of the meeting, alleging that she was in Kariba at the time.

She was longwinded in her responses to question put to her in cross-examination and at times would not answer the questions at all, proffering explanations that had not been called for.

Being such an astute person, she would have produced ample documentary evidence to show that the third party product was destined for another service station if such existed. I therefore find that the second defendant was an unreliable witness and will only rely on her evidence where it corroborated by other reliable evidence.

The factual issue that falls for determination in this matter is whether the delivery of the third part product to the defendants’ service station was in error as is alleged by the defendants. That there was such a delivery is common cause. The acceptance of the delivery, which constitutes conduct on the part of the defendant and not of the truck driver, was not in error.

Firstly, assuming that the delivery was in error and was meant for a service station across the road, the most logical and common sense response to such an error would have been for the truck ferrying the diesel to be directed to the correct service station. This was not done, meaning that both the truck driver and the recipient of the fuel were satisfied that the delivery was being correctly effected.

Secondly, if the fuel had been delivered to the defendants’ service station in error, documents of the correct destination of the fuel would have been made available to the plaintiff and o the court to prove the error. No such documents have been produced and no explanation has been proffered by the defendants for failing to produce the documents.

Thirdly, evidence led form Tendai Muzanenhamo that he had the pumps disabled to prevent the defendants from dispensing fuel from the affected pumps was unchallenged. It appears to me that if the fuel was meant for a third party, the defendants would not have been at pains to bypass the disablement placed by the plaintiff on the affected pumps and dispense the fuel.

Fourthly, no evidence was led as to how the delivered fuel was then given back to the rightful recipient.

Fifthly, it was the second defendant’s belief that if she were found to be receiving third party products, the most that the plaintiff would do would be to charge her penalties and handling charges. In my view, she did not consider this to be such a breach of the lease agreement as to entitle the plaintiff to cancel the lease agreement. She had committed a similar breach before and the lease had not been cancelled.


On the basis of the above, I am satisfied that on a balance of probabilities, the diesel that was decanted at the defendants’ service station on 6 November 2006 was not delivered in error and was duly accepted by the defendants in breach of the lease agreement between the parties.

It was submitted by Mr Kamdefwere that having breached the lease agreement, the defendants were entitled to be placed in mora before the lease was cancelled. In my view, the correct position is as submitted by Advocate Ncube. The defendants were placed in mora on 9 November 2006 by letter informing them of the intention of the plaintiff to cancel the lease. Instead of taking steps to remedy the breach, the defendants proceeded to breach the security measures that had been taken by the plaintiff to disable the pumps and continued to dispense the third party diesel.

I therefore find no basis upon which I can deny the plaintiff the relief that it seeks against the defendants.

In the result, I make the following order:

1. The cancellation of the lease over stands 37 A and B Lochnivar is hereby confirmed.
2. The defendants and all those occupying through them are to vacate the leased premises within 7 days from the date of this order failing which the deputy sheriff is hereby authorized to eject the defendants and all those occupying through them from the leased premises.
3. The defendant shall bear the plaintiff’s costs of suit.

Coghaln, Welsh & Guest, plaintiff’s legal practitioners.

Musunga & Associates, defendant’s legal practitioners.
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