Portnex International (Proprietary) Limited v Zimasco (Private) Limited & C. H. Lucas N.O.

### Preamble
Judgment No. SC 75/25
1
Civil Appeal No. SC 337/24
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REPORTABLE 	(75)

PORTNEX     INTERNATIONAL     (PROPRIETARY)     LIMITED

v

ZIMASCO     (PRIVATE)     LIMITED     (2)     C.     H.    LUCAS     N.O.

SUPREME COURT OF ZIMBABWE

GWAUNZA DCJ, MAKONI JA & MWAYERA JA

HARARE: 18 OCTOBER 2024

A.S. Ndlovu, for the appellant

D. Tivadar, for the first respondent

MAKONI JA:

[1] This is an appeal against the whole judgment of the High Court of Zimbabwe (“the court                         a quo”) sitting at Harare, dated 28 May 2024 in which it registered the arbitral award rendered by the second respondent in favour of the first respondent.  After hearing submissions from counsel, the Court dismissed the appeal with costs indicating that reasons for the order would be furnished in due course. These are they:

FACTUAL BACKGROUND

[2] The appellant is a company with limited liability, incorporated in South Africa, with a branch registered as a foreign company in Zimbabwe.  The first respondent is a company with limited liability registered in terms of the laws of Zimbabwe.  The appellant and the first respondent executed a lease agreement sometime in 2015.  The first respondent leased its west plant furnaces and infrastructure to the appellant.  This lease expired and was renewed in 2017 on similar terms.  According to the agreement, the appellant was required to return the plant and infrastructure ‘in a similar state of operability and maintenance’ but subject to ‘fair wear and tear’ on termination of the lease agreement.  The appellant breached the terms of the lease agreement by failing to pay the lease fees and various operating costs.  It failed to rectify the breach resulting in a dispute between the parties. Consequently, the dispute was referred to arbitration in terms of the lease agreement.

[3] The first respondent filed its claim for the outstanding amounts. The appellant filed                                     a counterclaim against the first respondent in which it raised a point in limine that the first respondent’s claim was incompetent as it had not sought leave of the court first before instituting proceedings against a company under corporate rescue.  The arbitrator dismissed the point in limine with costs.  Aggrieved, the appellant applied for the recusal of the arbitrator alleging bias on his part.  The application was summarily dismissed by the arbitrator and he went on to determine the merits of the matter.  The arbitrator then issued an award in favor of the first respondent.

PROCEEDINGS BEFORE THE COURT A QUO

[4] Following the award, the first respondent made an application for the registration and enforcement of the award, in the court a quo, in terms of Article 35 of the Arbitration Act [Chapter 7;15] (the Act).  The first respondent averred that it instituted proceedings in order to register the arbitral award and bill of costs for enforcement purposes.  It prayed that the appellant pays the costs of the application on a legal practitioner and client scale as the registration of the award was necessitated by its failure to comply with the award.

[5] The appellant opposed the application for the registration of the arbitral award.  It contended that the arbitral award was invalid and a nullity on the basis that the arbitral proceedings, from their inception, were fraught with procedural irregularities.  It averred that it raised a point                  in limine which was dismissed.  It then made an application for the recusal of the arbitrator on the basis that he was biased, which was again dismissed.  The appellant alleged that the arbitrator had been making and changing directives in a manner that suited the first respondent without hearing both parties.  It contested the determination of the application for recusal and notified the first respondent and the arbitrator of its intention to request a stay of proceedings.  However, the arbitrator dismissed the stay application before it was formally submitted and without hearing any oral submissions.

FINDINGS BY THE COURT A QUO

[6] The court a quo held that the award was registerable on the basis that the first respondent had satisfied the procedural requirements for the registration of the arbitral award in terms of Article 35(2) of the Act.  It found that the appellant failed to raise any recognizable legal basis on which registration may be denied, nor did it plead facts that invoke Article 36 of the Act.  It further found that such failure made the registration of the award mandatory.  The court                         a quo further held that the respondent presented an authenticated arbitral award which was not disputed by the appellant.  In coming to its decision, the court a quo relied on the case of Gwanda Rural District Council v Lourens Marthinus Botha Snr SC 174/20.  Aggrieved by the decision of the court a quo, the appellant noted this instant appeal on the following grounds:

[7]    1. “The court a quo erred in not engaging the material issue placed before it being whether an award rendered by an arbitrator who considered the matter on the merits without determining an extant application for his recusal was valid.

The court a quo having simultaneously heard an application for the setting aside of the award erred in concluding as it did that the appellant had not invoked provisions of Article 36 of the Model Law.

3.    The court a quo erred in recognizing the award in the currency of the United States of America without articulating a basis for doing so and under circumstances where the sums claimed would have converted by operation of law.

The court a quo erred in recognizing an award that computed costs without jurisdiction and in the absence of an application for such computation having been made by any of the parties.”

RELIEF SOUGHT

[8] The appellant sought the following relief:

“That the appeal is allowed with costs.

That the judgment of the court a quo is set aside and in its place be substituted with the following:

“The application is dismissed with costs.”

PRELIMINARY POINTS

[9] At the commencement of the hearing of the appeal, counsel for the appellant, Ms Ndlovu submitted that there was another appeal pending before this Court involving the same parties. She made an application for stay of the current proceedings so that the appeals are heard concurrently with the other pending appeal.  She submitted that it was undesirable for the court to determine matters piecemeal.

[10]  Per contra, counsel for the first respondent, Mr Tivadar submitted that the two appeals should not be consolidated as they dealt with two completely different issues.  He submitted that the other matter related to an interim award and in casu the court is seized with the final award.  He argued that the appellant still has to seek and obtain leave to appeal in the other matter as it required leave.  He further submitted that the court could not assume that leave to appeal would be granted.  After a brief exchange with the court, counsel for the appellant withdrew the application.

SUBMISSIONS ON THE MERITS

[11] Ms Ndlovu for the appellant submitted that the conduct of the arbitrator of not determining the application for recusal before him was contrary to public policy.  On that basis, she contended that the arbitral award was invalid.  She contended that the conduct of the arbitrator of failing to determine a material issue that was before him amounted to a gross irregularity.  The Court inquired from counsel the basis upon which the findings of the court a quo could be faulted in view of the fact that the appellant had neither made an application for the setting aside of the arbitral award in terms of Article 34 nor pleaded any facts invoking Article 36 of the Model Law in the court a quo.  She did not come up with a meaningful response.

[12]  Per contra, counsel for the respondent submitted that the requirements for the recognition of an award as set out in Article 35 (2) of the Act were satisfied.  Mr Tivadar argued that the only redress available to the appellant was making an application in terms of Article 34, for the setting aside of the award, which it failed to do.  Furthermore, he contended that the appellant could not expect the court a quo to invoke Article 36 (1) (b) (ii) of the Act which the appellant itself had not raised.  Counsel also submitted that the arbitrator did not compute any costs, rather he only rendered an invoice his costs.

ISSUES FOR DETERMINATION

[13]   The appeal raises one issue for determination which is:

Whether the court a quo was correct in its decision to register the arbitral award.

APPLICATION OF THE LAW TO THE FACTS

[14]  The appellant contended that the court a quo erred in finding that the appellant failed to plead facts which invoke Article 36 of the Arbitration Act, when appellant clearly laid out facts which invoke the Article in its opposing affidavit and in its founding affidavit to the application for setting aside the award. It must be observed at this juncture that the application in terms of Article 34 being referred to by the appellant related to an application to set aside the interim award.

[15]   It further argued that the court a quo erred in recognizing the award in United States Dollars without providing a valid reason or justification for doing so, especially since the amounts claimed would have been automatically converted to the local currency by operation of law.

[16]  Per contra counsel for the respondent submitted that the requirements for the recognition and registration of the award as set out in Article 35 (2) of the Act were satisfied

[17]   The court a quo in determining the matter stated, and correctly so, the following;

“It is settled law that Article 35 of the Arbitration Act [Chapter 7:15], inter alia, provides as follows:

‘(1) An arbitral award, irrespective of the country in which it was made, shall be recognized as binding and, upon application in writing to the High Court, shall be enforced subject to the provisions of this article and of article 36.

The party relying on an award or applying for its enforcement shall supply the duly authenticated original award or a duly certified copy thereof and the original arbitration agreement referred to in article 7 or a duly certified copy thereof. If the award or agreement is not made in the English language, the party shall supply a duly certified translation into the English language.’

From the papers before me, it is evident that the applicant satisfied the procedural requirements set out in Article 35 (2) of the Arbitration Act hence the respondent did not raise objections with regard to the said point.  It follows, the award should be registered.  The respondent in its opposing affidavit failed to raise any recognizable legal basis on which registration may be resisted.  In essence, the respondent failed to plead facts which invoke Article 36 of the Arbitration Act, consequently, registration of the award in question becomes mandatory.  In Gwanda Rural District Council v Lourens Marthinus Botha SC 174/20 at p 4, the Supreme Court observed as follows:

‘Before delving into the merits or otherwise of the grounds of appeal, I pause to observe that when presiding over the registration of an arbitral award, the court a quo had very limited jurisdiction. This is mainly because its function was merely to register the arbitral award for purposes of enforcement.

Thus, in terms of applicable law an application for the registration of an arbitral award is granted upon its mere presentation, authentication and production of the original arbitration agreement subject to the provisions of article 36.  The essential requirements to be met by the applicant may be summarised as follows:

Present to the High Court the original or a certified copy of the arbitral award.

2. Present to the High Court the original arbitration agreement referred to in Article 7.

3. If the award or arbitral agreement is in a language other than English the applicant   must provide a duly certified translation into English.

Once the 3 basic requirements are met the applicant is entitled on the face of it to register the arbitral award as of right.  The right to register is however not cast in stone as it is subject to Article 36 which provides an exception to the general rule entitling the applicant to register the arbitral award upon fulfilment of the                   3 basic requirements for registration.’”

[18]  As was correctly observed by the court a quo the appellant did not plead any facts, in its notice of opposition, that would invoke Article 36(1) (b) (i) which outlines the grounds for refusing recognition or enforcement of an arbitral award.  A party opposing recognition of an award must demonstrate specific grounds, such as:

(a). Incapacity: A party to the arbitration agreement was under some incapacity.

(b). Invalid Agreement: The arbitration agreement was invalid under applicable law.

(c). Lack of Notice: The party was not given proper notice of the appointment of an arbitrator or the proceedings.

(d). Scope of Award: The award deals with a dispute not contemplated by the terms of reference.

(e). Composition Issues: The composition of the tribunal or procedure was not in accordance with the agreement or law.

(f). Public Policy: The award is contrary to public policy.

[19]  Neither did the appellant bring an application before the court a quo to set aside the award in terms of Article 34.  It was aware of the need to bring an application for the setting aside of the final award. In its own opposing affidavit, it made this point in para 7 where the deponent, who happens to be a senior legal practitioner, stated the following;

“Respondent contends that the arbitral award is invalid and a nullity, and therefore cannot be allowed to stand. Accordingly, respondent intends to approach to set the arbitral award aside…….” (sic)

[20]  Instead, the appellant filed an application for the setting aside of the interim award, which application was made way before the granting of the final award.  Clearly what the appellant succeeded in doing in its notice of opposition was to vent its frustration and dissatisfaction with the arbitrator’s decision on the basis that the arbitrator decided to deal with the substance of the matter in the face of an application for recusal.  However, dissatisfaction with an arbitrator's decision alone does not suffice to have it set aside.  Substantive legal grounds, as provided in Article 36 of the Act must be presented to warrant refusal of recognition or an application to set aside the award.

[21] The position was clearly articulated in Gwanda Rural Council v Lourens Marthinus Botha Snr, supra, at p 15 wherein it was held as follows:

“As we have already seen, the parties in their arbitration agreement freely and

voluntarily clothed the arbitrator with final binding jurisdiction. It is trite that ordinarily a court or tribunal of final jurisdiction can do no wrong as its determination is generally not subject to any other authority. The only window of opportunity is where the High Court is asked to exercise its powers of review under Article 34 of the Model Law. The appellant could however not invoke the court a quo’s review powers by merely lodging an objection to registration of the award.  The appellant was obliged to lodge a proper application for review in terms of Article 34 to trigger the court a quo’s review powers if it intended to subject the award to review. This it did not do. The remarks of Malaba DCJ as he then was in Zimbabwe Educational Scientific, Social and Cultural Workers Union v Welfare Educational Institutions Employers Association SC 11/23 at p5 are apposite, though made in the context of the Labour Act [Chapter 28:01].  In that case the learned judge had this to say:

‘An application or appeal to a court or tribunal is a remedy which exists because there is a statutory right to use it to seek relief. For the court to exercise the right to review a decision of the arbitrator as provided by s 89 (1) (d) (1) there has to be a valid application for review in terms of the Act or any other enactment as provided by s 89(1). The appellant not having taken any valid steps to have the award set aside and having failed to fulfil the conditions laid down under… for objection to the registration of an arbitral award, the appeal can only fail.’” (My emphasis)

[22] The appellant finds itself in the same predicament as the appellants in the above cited authorities.  It failed to engage the remedies availed by statute to defeat an application for recognition and enforcement of an arbitral award.

DISPOSITION

[23]   In light of the foregoing analysis, the court a quo did not err when it recognized and registered the arbitral award in favour of the first respondent.  The appeal lacked merit, hence the decision of this Court as set out in para 1 of this judgement.

GWAUNZA DCJ	:           I agree

MWAYERA JA		:          I agree

Madzima, Chidyausiku Museta, appellant’s legal practitioners

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