Zimbabwe Nantong International (Private) Limited v (1) FBC Holdings Limited (2) Gideon Mukorombindo N.O

### Preamble
Judgment No. SC 84/25
1
Civil Appeal No. SC 542/24
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REPORTABLE      (84)

ZIMBABWE     NANTONG    INTERNATIONAL     (PRIVATE)    LIMITED

v

(1)     FBC     HOLDINGS     LIMITED     (2)     GIDEON MUKOROMBINDO     N.O

SUPREME COURT OF ZIMBABWE

MAVANGIRA JA, KUDYA JA & MWAYERA JA

HARARE: 28 FEBRUARY 2025

R.Mabwe, for the appellant

T.Magwaliba, for the first respondents

No appearance for the second respondent

MWAYERA JA:

This is an appeal against the whole judgment of the High Court (“the court a quo”) sitting at Harare handed down on 28 August 2024.  The court a quo granted an application for setting aside an arbitral award in terms of Article 34 of the Arbitration Act [Chapter 7:15] (“the Act”) in favour of the first respondent.  After hearing submissions from counsel this Court dismissed the appeal with costs and indicated that reasons for the decision would follow in due course.  These are they:

FACTUAL BACKGROUND

The appellant is a company duly registered in terms of the laws of Zimbabwe.  The first respondent is an investment holding company listed on the Zimbabwe Stock Exchange.  The second respondent is one Gideon Mukorombindo cited in his official capacity as the duly appointed Arbitrator who rendered the arbitral award which forms the basis of this appeal.  The salient factors of this matter are as follows;

The first respondent floated a selective tender for the construction of its head office.  The selective tender resulted in four bids being considered.  Resultantly the appellant was pronounced as the successful bidder and was awarded the tender.  Consequently, sometime in August 2021, the appellant and the first respondent entered into an agreement: titled “Agreement Schedule of Conditions of Building Contract” (the agreement), for the construction of the first respondent`s head office and ancillary buildings.  The parties agreed on a contract price of United State Dollars 24 967 340.02 payable in the equivalent Zimbabwean Dollars at the prevailing auction rate on the date of payment.  In terms of the contract the construction works were to commence on 31 August 2021 and were to be completed by 30 June 2023.  It was part of the agreement that in the event of a dispute or difference arising out of the building contract, the architect would determine the dispute and his decision would be final and binding.  If the decision of the architect was disputed, the dispute would then be referred to arbitration.

The appellant failed to commence construction of the building on the scheduled commencement date and raised issue with the contract price.  It was of the view that the performance of the contract was susceptible to inflation and exchange rate movement and as such suggested that the first respondent had to consider making payment at the open market rate or have 40% of the contract amount payable in United State Dollars.  The first respondent through the architect, advised the appellant that it was not agreeable to the suggested proposal as it did not have the requisite United State Dollars.

The architects emphasised that the tender documents and signed contract were in RTGS Dollars and not United State Dollars.  On 24 September 2021, the architect issued a notice in terms of clause 23(9) of the agreement informing the appellant of its breach in failing to proceed with the construction works with reasonable diligence.  In response, the appellant disputed that it was in breach of the agreement as it had engaged with the first respondent in negotiations on the performance of the agreement.  The appellant stated that it had received assurances from the architects that it would be paid in United State Dollars, failing which it would be compensated for any loss emanating from the exchange rate discrepancies.  The appellant also averred that the clause that payment would be made at the prevailing RBZ auction rate was unilaterally inserted by the first respondent after the contract had already been signed on 15 October 2021. The first respondent then terminated the contract between the parties because the appellant failed to commence construction on the agreed date.  In light of the foregoing, the dispute between the appellant and the first respondent was then referred for arbitration.

PROCEEDINGS BEFORE THE ARBITRATOR:

The appellant contended that the first respondent unilaterally varied the contract by inserting a new clause to the effect that payment to the contractor will be in ZWL at the prevailing RBZ auction rate.  The appellant argued that such unilateral variation of the contract amounted to repudiation which entitled the appellant to cancel the contract and claim damages.  The appellant further averred that it signed the contract on the understanding that the amount was payable in United States Dollars or at a value that would retain the contract value as agreed on 30 July 2021.  It also argued that it did not breach the contract and that any cancellation by the first respondent would entitle it to damages totalling United State dollars 5 200 000.00 for the construction of a temporary guard house, payment of the security guards on site, and 10% of the contract amount which constitutes indirect loss of business as per industrial practice.

The first respondent on the other hand maintained that the agreement correctly recorded that payment will be made in RTGS and not United States Dollars.  It further contended that the tender was priced in United States Dollars with payment being made at the prevailing RBZ auction rate at the time of payment.  It also contended that it did not breach any terms of the contract stressing rather, that the appellant repudiated the contract by failing to commence construction on 31 August 2021 as agreed.  It further argued that in terms of clause 23(a) of the agreement it properly cancelled the agreement upon breach by the appellant.

The second respondent, the arbitrator, held that there were inconsistencies in the wording of the payment terms in the contract documents. He held further that such inconsistencies would only be cured and aligned to each other by an addendum.  He also held that the agreement was defective in that the first respondent had unilaterally varied its terms.  Further, the arbitrator held that there was no evidence that the appellant had submitted a program of works to the project consultants after 25 August 2021. In conclusion the arbitrator held that the first respondent`s assertion that the appellant had failed to proceed with reasonable diligence was unsustainable.  He conversely, held that it was the first respondent who had to pay damages to the appellant for wrongful cancellation of the contract.  The arbitrator thus ordered the first respondent to pay the appellant USD 967 000.00 for indirect loss and USD 8200.00 for wrongful cancellation of the contract within 30 days of the award.

PROCEEDINGS BEFORE THE COURT A QUO

Aggrieved by the decision of the second respondent the first respondent on 10 November 2022, filed an application in the court a quo for the setting aside of the arbitral award in terms of Article 34 of the Act.

The first respondent sought to have the award which it alleged was in conflict with the public policy of Zimbabwe set aside.  Further it contended that the arbitrator did not have the authority to assess the validity of the allegations made by the appellant thereby breaching the rules of natural justice.  The first respondent sought redress to the arbitrator`s finding that it had unilaterally varied the contract by having the award set aside.

The appellant on the other hand maintained that the award should not be set aside.  It argued that the cancellation of the contract by first respondent was irregular and premature because there was no programme of works to enable assessment of reasonable diligence.  Further, appellant argued that the first respondent had unilaterally varied the contract by inserting a condition that it would be paid in Zimbabwean dollars at the ruling RBZ auction rate.  It thus contended that the arbitral award was properly issued and should not be set aside.

FINDINGS OF THE COURT A QUO

The court a quo made a finding that there was nothing on record in support of the averment that the first respondent illegally inserted a new clause to the agreement.  Further that the second respondent`s suggestion that the parties were obliged to execute an addendum to the main contract constituted a misnomer as it amounted to the tribunal making a contract for the parties.  It found that the contract was clear that the price was payable in local currency.  It held that the arbitral award was in conflict with public policy thereby warranting its being set aside.  As a result the application for setting aside the arbitral award was granted with costs.

PROCEEDINGS BEFORE THIS COURT

Aggrieved by the judgment of the court a quo setting aside the arbitral award the appellant noted the present appeal on the following grounds of appeal:

GROUNDS OF APPEAL

The second respondent having awarded damages as a natural remedy for unlawful termination of contract, the court a quo erred and misdirected itself in setting aside the arbitral award without impugning the arbitrator`s finding that first respondent had unlawfully terminated the contract.

A fortiori, the court a quo erred and misdirected itself in not finding that without the “Programs of Works Schedule” the cancellation of the contract by the first respondent, as found by the arbitrator, was unlawful in terms of the contract hence the award of damages was not or could not in the circumstances be regarded as contrary to public policy.

3. The court a quo erred and misdirected itself in not finding that the first respondent`s alleged misdirection in finding that the first respondent had unilaterally varied the contract was not the basis of the award of damages but unlawful  termination of contract hence the issue of unilateral variation of contract did not suffice setting aside the arbitral award.

4. The court a quo erred and misdirected itself in treating the application before it as an appeal and set aside the arbitral award on the basis of what, in its eye, ought to have been done and not so much that the findings of the arbitrator were wrong and went beyond faultiness so as to offend public policy.

5.  The court  a quo as erred and misdirected itself by deviating from the specific grounds upon which the application before it was founded and set aside the award without upholding or pronouncing itself on such grounds when the consideration of such grounds was crucial to determine whether the arbitrator’s perceived errors warranted setting aside the award.

RELIEF SOUGHT

The appeal succeeds with costs.

The judgment of the court a quo be and is hereby set aside and substituted with the following:

“The application for setting aside the arbitral award granted and dated 8 October 2022 by the arbitrator Gideon Mukorombindo be and is hereby dismissed with costs.”

ISSUES FOR DETERMINATION

14.   (1) Whether or not the court a quo dealt with all the issues before it.

(2) Whether or not the court a quo erred in setting aside the arbitral award.

SUBMISSIONS BEFORE THIS COURT

15.  Mrs Mabwe, counsel for the appellant submitted that the court a quo did not determine all the issues placed before it.  She submitted that such failure amounted to a misdirection which requires an intervention by the appellate court.  She relied on the following cases Toro v Vodge Investments (Pvt) Ltd & Ors SC 15/17.  Gwaradzimba v CJ Petrron and Company (Proprietary) Limited 2016 (1) ZRL 28 (S).  According to counsel the court a quo did not relate to the computation of damages yet that was a live issue before it.  She urged this court to intervene and set aside the judgment of the court a quo on the basis of its failure to determine the dispute on damages which was placed before it.  She further drew the attention of the court to Usaihwevhu & Ors v UZ Collaborative Research Programme 2010 (2) ZLR 448 and the Chinese case of Brunswick Bowling & Billards Cooperation v Shanghai Company Limited & Anor 2009 HKCFI 94 at para 111.  Counsel further submitted that the court a quo erred by not determining how the arbitrator exercised his powers and establishing how the award was contrary to public policy as alleged by the first respondent.  She submitted that the application was premised on six grounds all of which were not determined so as to establish how the award was contrary to public policy.  These grounds were enumerated as follows:

(i) The second respondent was unqualified to deal with the matter.

(ii) The second respondent made conclusions of facts divorced from law.

(iii) There were contradictory findings in the award.

(iv) The second respondent resolved issues not placed before him.

(v) The first respondent questioned issues of damages.

(vi) The first respondent questioned the arbitrator’s powers to grant an alternative relief.

According to counsel, the court a quo ought to have determined how the arbitrator exercised his powers and how the award was contrary to public policy which it did not do.  She urged the court to allow the appeal on the basis that the court a quo erred.

16.  Per contra, Mr Magwaliba, counsel for the first respondent, submitted that the appellant’s case was confusing as the grounds of appeal did not speak to the heads of argument and the heads of arguments were also divorced from appellant’s oral submissions in court. He argued that this, on its own, warranted the appeal being struck off the roll with punitive costs.  He further submitted in the main that the court a quo properly summarized the relevant issues and made a determination regarding the issues.  He referred the court to the case of Delta Corporation Limited v Zimbabwe Revenue Authority SC 62/24.

17.  According to counsel, the court a quo made a determination on the issues that were the pillar of the arbitral award.  Counsel further submitted that the court a quo was correct in its finding that the cancellation of the contract by the first respondent was lawful.  He further submitted that the second respondent erred by finding that the parties had to enter into an addendum to their contract as that amounted to making a contract for the parties.  He further submitted that the contract between the parties was clear and that there are no differences in the prices in the bill of quantities and the main contract.  The contract was clear that the appellant was to be paid in Zimbabwe dollars at the prevailing RBZ auction rate.  He submitted that the court a quo correctly set aside the arbitral award and urged the court to dismiss the appeal with costs on a punitive scale.

APPLICATION OF THE LAW TO THE FACTS

Whether or not the court a quo dealt with all the issues before it.

It is trite that a court is expected to determine all issues placed before it.  This means that the court must address and make a decision on every pertinent issue presented to it by the parties.  To that extent therefore the court’s decision must reflect and state its findings on issues presented by the parties.  In Nhimbe Fresh Export (Private) Limited v Prisma Packaging and Anor SC 7/24, at p 7, Guvava JA made the following pertinent remarks:

“A court’s determination must resolve the dispute between the parties.  Whether it be on a question of fact or law, a court must determine and inform the parties in clear terms how it has resolved the dispute.  The need for a determination of all issues placed before a court can never be over emphasized.  (See Fox & Carney P/L v Sibindi 1989 (2) ZLR 173 at 179 G-H). Failure by a court to make a judicial decision or determination indeed amounts to a misdirection on the part of the court which misdirection would warrant setting aside of proceedings and a remittal of the matter for a fresh hearing.”

18.  This Court, in PG Industries (Zimbabwe) Ltd v Bvekerwa & Ors 2016 (2) ZLR 14 (S) at p 18 stated the effect of the court’s failure to determine an issue placed before it for determination, Gowora JA,as she then was, stated as follows:

“The position is settled that where there is a dispute on a question, be it on a question of fact or point of law, there must be a judicial decision on the issue in dispute.  The failure to resolve the dispute vitiates the order given at the end of the proceedings.  Although the learned judge may have considered the question as to whether or not there was an irregularity in the citation of the employer, there was no determination on that issue.  In the circumstances, this amounts to an omission to consider and give reasons which is a gross irregularity.”

See also Nzara v Kashumba 2018 (1) ZLR 194 (S) at 201 G – 202 B

19. In the present case the appellant’s counsel submitted that the second respondent gave an award of damages and the computation thereof, which the court a quo did not relate to.  It was counsel’s contention that the court a quo did not give a determination regarding the issue. Conversely the first respondent’s counsel submitted that the court a quo properly crystalized and summarized the issue and determined the same.  This Court, agrees with              Mr Magwaliba on this aspect.  The court a quo related to the issue of damages in its judgment in para 87 and 88 where the following apposite remarks were made:

“[87] He obviously side stepped, as he had done earlier addressing the question as to whether formula 2 was in fact, not simply the expression of formula 1.  Namely that to say paid in ZWL meant paid in ZWL at RBZ Auction Rate.  Unstuck by lack of tangible formula to apply to the term paid in ZWL, the Arbitrator unsurprisingly proceeded to grant USD denominated monetary damages to Zimbabwe Nantong.

[88] This finding was so despite the fact that first the basis award, being the formula set out in the appendix to Bill No. 1 prescribed payment of “Liquidated and ascertained damages: USD$ 4,500 per day to be paid at ZWL equivalent.  And secondly that the arbitral award being based as it was in USD, defeated the Arbitrator’s earlier conclusion that the USD pricing would be settled in ZWL.  In the result, the Arbitrator founded his subsequent findings on this flawed premise.”

20.   Further, in its disposition, the court a quo held that the first respondent erred by awarding a purely USD award where even by his own reasoning the contract price was payable in ZWL.  This goes to show that the court a quo clearly ventilated the issue relating to the damages awarded by the second respondent.  Therefore, all issues before the court a quo were determined.

Whether or not the court a quo erred in setting aside the arbitral award.

21.  The law relating to arbitral awards is provided for in Article 34 of the Act which provides as follows:

“Application for setting aside as exclusive recourse against arbitral award.

Recourse to a court against an arbitral award may be made only by an application for setting aside inaccordance with paragraphs (2) and (3) of this article.

An arbitral award may be set aside by the High Court only if—

The party making the application furnishes proof that—

(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication on that question, under the law of Zimbabwe; or

(ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; or

(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Model Law from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Model Law; or

(b) The High Court finds, that—

(i)  the subject-matter of the dispute is not capable of settlement by arbitration under the law of  Zimbabwe; or

(ii) the award is in conflict with the public policy of Zimbabwe.

(3) …

(4) …

(5)  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.”

22. The import of the article was ably expounded in the case of Zimbabwe Manpower Development Fund v Vengesai and Anor SC 97/19 at p 5, wherein Gowora JA (as she then was) stated that:

“Parties to a contract may, by written agreement, choose arbitration as the process by which any disagreement or dispute arising from their agreement are resolved.  An independent and impartial person can be chosen directly or indirectly by the parties themselves. The principal characteristic of this process is that the dispute is removed from the jurisdiction of the courts.  In addition the parties do not have a right of appeal against the decision of the arbitrator. This is principally because the arbitration process is meant to bring about finality to litigation.

The final and binding effect of an arbitral award was considered by this Court in Cone Textiles (Pvt) Ltd v Redgment & Ors 1983 (1) ZLR 88 (S) at 92A, where this Court stated:

‘The starting point is that the parties have chosen to go to arbitration instead of resorting to the courts, they have specifically selected the personnel of the tribunal, and they have agreed that the award shall be final and binding: Clark v African Guarantee and Indemnity Co Ltd 1915 CPD 68, at p 77.  It is for these reasons that a court will be most reluctant to interfere with the award of an arbitrator.”’

23. It was further stated at p 6 that “However, under limited and legally prescribed circumstances, an application can be made to the courts for the review or setting aside of arbitral award.  Within this jurisdiction provision for the setting aside of an arbitral award may be found in Article 34 of the schedule to the Arbitration Act [Chapter 7:15], The Model Law.’’

24.  In the case of Legacy Hospitality Management Services Limited v African Sun Limited & Anor, SC 43/22 at p 12 this Court aptly stated:

“It is trite that parties to a contract are bound by the terms of the contact.  If parties contractually agree to arbitration as a means of dispute resolution, then the court should be loath to interfere with decisions made by arbitrators.  Intervention is only resorted to if the decision reached is in contravention of the Arbitration Act [Chapter 7:15] and /or is so irregular and illogical to amount to a moral turpitude on the part of the arbitrator.  This principle was emphatically enunciated by Malaba DCJ (as he then was) in Alliance Insurance v Imperial Plastics (Pvt) Limited & Anor SC 30/17 wherein he stated, at p 5 of the judgment:

‘The rationale behind the provision is that voluntary arbitration is a consensual adjudication process which implies that parties have agreed to accept the award given by the arbitrator even if it is wrong, as long as the proper procedures are followed.  The courts therefore cannot interfere with the arbitral award except on grounds outlined in Article 34 (2).  An application brought before the court under this provision is in essence a restricted appeal and the applicant should prove the grounds set out in order to succeed in his application.’”

The cautionary approach was lucidly enunciated in Peruke Investments (Pvt) Ltd v Willoughby Investments (Pvt) Ltd & Anor 2015 (1) ZLR 491(S) and also Zimbabwe Electricity Supply Authority supra…..”

And concluded at p 13 that:

“From the cases cited above, it appears settled that an arbitral award will not be lightly set aside on the basis that a party considers that the decision of the arbitrator is wrong. The court will not interfere with an award unless the reasoning of the arbitrator constitutes a palpable inequity so outrageous and far reaching in its defiance of logic or acceptable moral standards as to cause a fair-minded person to regard it as hurting all sense of justice and fairness. Article 34 is certainly not intended for the court to reassess a dispute on the basis that the appellant views the arbitrator’s decision as wrong. ”’

25.  In the present case the court a quo held that the second respondent had incorrectly concluded that the first respondent had unlawfully cancelled the contract.  It stated that in coming up with that decision the arbitrator had ignored the established principles of contract law being the parole evidence rule, caveat subscriptor and the principle of illegality of a contract.  It held that the arbitrator by introducing the need for an addendum to the contract attempted to create a contract for the parties instead of interpreting the contract.  The arbitrator went on to grant an award of damages solely denominated in United States Dollars in contravention of the Finance Act (NO2) ACT NO.7 of 2019.  The award was in United State dollars without giving an option for payment of damages in the local currency.  This was despite the fact that the parties’ contract specifically provided that payment would be made in local currency.

DISPOSITION

26.  The court a quo correctly captured the legal position and related it to the facts in a manner which leaves no room for interference with its judgment.  First and foremost, the basis of the award, considering that the arbitrator sought to make a contract for the parties, was impugned.  This resultantly meant that the award would not stand.  The effect of granting an award not contemplated by the contract was the grant of an unlawful award.  Consequently, any award unlawfully granted is contrary to public policy.  To the extent that the award was contrary to law and therefore to public policy the court a quo properly and correctly set it aside.  There was no misdirection in the judgment of the court a quo.  The appeal has no merit.

27.  Regarding costs, they are in the discretion of the court.  This Court finds no reason to depart from the general rule that costs follow the result.

It is for the above reasons that this Court issued an order dismissing the appeal with costs.

MAVANGIRA JA	: 	I agree

KUDYA JA		:	I agree

Rusinahama-Rabvukwa Attorneys, appellant’s legal practitioners.

Dube, Manikai & Hwacha, 1st respondent’s legal practitioners.