DBF Capital Partners Limited v Atlas Mara Financial Services Limited and Ors (2023/HPC/ARB/0799) [2024] ZMHC 174 (23 February 2024)

IN THE HIGH COURT FOR ZAM AT THE COMMERCIAL REGIST HOLDEN AT LUSAKA (Civil Jurisdiction) JUDICIARY /HPC/ ARB/0799 2 ! fEI 21~ COMMERCIAL REGISTRY 0~ IN THE MATTER OF 0. 19 OF 2000 AND IN THE MATTER OF AN APPLICATION FOR AN INTERIM MEASURE BETWEEN: OF PROTECTION DBF CAPITAL PARTNERS LIMITED PLAINTIFF AND ATLAS MARA FINANCIAL SERVICES LIMITED 1 ST DEFENDANT AFRICAN BANKING CORPORATION ZAMBIA LIMITED 2ND DEFENDANT MICRO FINANCE ZAMBIA LIMITED 3RD DEFENDANT Before Hon. Lady Justice Chilombo Bridget Maka. For the Plaintiff: Mr. M. Ndalameta with Mr. M. Chomba of Messrs. May & Co. For the Defendants: Mr. G. Chama with Ms. Natasha Chibuye of Messrs Abigail & Chama Advocates RULING Legislation Referred to: 1. The Rules of the Supreme Court of England 1999 Edition 2 . The Arbitration Act No. 19 of 2000 Cases Referred to: 1. Strelley vs. Pearson (1880) 15 Ch D 113. 2 . Mukwa Investment Limited vs. Pan African Building Society and Bank of Zambia (2014/HP/C/0422 ) , . 3 . American Cyanamid vs. Ethicon Limited (1975) AC 396 4 . Mobile Oil Zambia Limit ed v s. Msiska, Lundwa (1983) ZMSC, 9 . 5 . Blackwell Railway Company vs. Cros s (1886) QB 310. 1. Introduction and Background. 1.1. This is a case in which DBF Capital Partners Limited, the Plaintiff, is seeking an Order of interim measure of protection for purposes of preserving a ll the issued shares in Micro Finance Zambia Limited, the 3 rd Defendant. 1. 2 . The originating summons commencing this action was pursuant to section 11 of the Arbitration Act as read with Rule 9 of the Arbitration (Court Proceedings) Rules, Statutory Instrument No. 75 of 200 1. The Originating Summons were accompanied by an affidavit and skeleton arguments. 1.3. Atlas Mara Financial Services Limited, African Banking Corporation Zambia Limited and Micro Finance Zambia, herein referred to as 1st , 2 nd and 3 rd Defendants respectively filed an affidavit in opposition and skeleton arguments filed on 12 th January, 2024. 2 . The Plaint iff's Case. 2 .1. Mr. Clergy Mweemba Simatyaba, the Country Representative of the Plaintiff Company, swore the affidavit in support. R2 2.2. The gist being that a dispute had arisen pertaining to the Shares Sale Agreement, SSA which the parties had executed on 21 st December, 2021. The Notice of termination dated 8 th August, 2023 , exhibited as "CMS 3" allegedly terminating the SSA is what triggered the dispute. 2.3. On account that the SSA had an arbitration clause, the dispute that arose is to be resolved at arbitration. Consequently, the Plaintiff appointed its party nominated Arbitrator and was seeking a preservation order pending arbitral proceedings. 3 . The Plaintiff's Skeleton Arguments. 3.1. The gist of the submission was that section 11 (1) (2) (a) and (c) and (4)(a) of the Arbitration Act, grants this Court with power to grant an interim relief. This can be before or during arbitration when the matter is urgent and the Arbitral Tribunal cannot grant the relief. 3.2. It was contended that whereas the Plaintiff has nominated an arbitrator, the Defendants are yet to appoint their own. These processes according to the Plaintiff would take some time and as such the Arbitral Tribunal has not been constituted. 3.3. The provisions of Order 27 Rule 3 of the High Court rules and order 29 rule 2 (2) of the Rules of the Supreme Court were cited in augmenting the Court's jurisdiction to grant R3 a preservation order relating to a property in dispute. The cases of Strelley vs. Pearson111 and Mukwa Investment Limited vs. Pan African Building Society and Bank of Zambial2 J were cited to illustrate instances when the Court granted preservation orders. 3.4. It was argued that similarly in this case, the preservation of the state of affairs in the 3 rd Defendant company was pertinent so as to preserve the sanctity of the arbitral proceedings and the value of the shares. 3.5. The Plaintiffs quest was that clause 6 of the Shares Sales Agreement be adhered to. The concern being that without a preservation order, the Defendant may conduct business of the 3 rd Defendant thereby interfering with the value of the shares. That such an outcome would irreparably impact the Plaintiffs right under the agreement. 3.6. The Plaintiff urged the Court to grant the preservation order as doing so will not prejudice the Defendants. 4 . The Defendant's Case. 4.1. The affidavit in opposition to summons for an order for interim measure of protection was deposed to by Sandra Malupande, the Company Secretary of the 2 nd Defendant. Ms. Malupande averred that the Arbitral Tribunal has since been constituted as evidenced by the email correspondence marked "SM 1 ". R4 4.2. It was further stated that the Plaintiff has not demonstrated any urgency, and as such the grant of the interim measure of protection would be oppressive and disturb the status quo. That the remedy of damages would be sufficient if breach of contract was proved. The Defendants held strongly to the view that the Agreement was terminated and by withdrawing the Esera amount on 27th October, 2023, the Plaintiff confirmed termination. 4.3. It was thus contended that the Plaintiff will not suffer irreparable injury if the application was not granted. 4.4. The Defendant stated that whilst the Plaintiff was seeking for the Defendant to continue performing clause 6 of the Agreement, they were on their part not performing their obligations in clause 4.3.1 relating to paying a portion of the purchase price in Escrow. 4.5. The possibility of the Defendant dissipating the property was dispelled on account of applicable rigorous regulatory approvals. 5. The Defendant's Skeleton Arguments. 5.1. The gist of the submission was that on account that the Arbitral Tribunal has since been constituted and urgency has not been demonstrated by the Plaintiff, this Court has no jurisdiction to grant an interim relief that is being sought. This is so because section 11 (4) of The Arbitration RS Act restricts the powers of the Court to grant an interim relief. 5.2. The Defendants' prayer was that the application be dismissed with costs. 5.3. It was further submitted that should the Court hold the view that it has jurisdiction to determine the application, then the same should be dismissed. The reason for this argument was that the term for granting an interlocutory injunctions as was espoused in the case of American Cyanamid vs. Ethicon13 1 had not been met. 5.4. The Defendants' argument was that the principles that guide the Court when faced with an application for an injunction are also applicable to an application for an interim measure of relief. 5.5. It was contended that the Plaintiffs application is frivolous or vexations as the Plaintiff has failed to show the urgency of th eir application. It was submitted that the Notice to terminate was issued on 8 th August, 2023, and yet it took three months for the Plaintiff to apply for interim measure. 5.6. Further that failure by the Plaintiff to satisfy the conditions precedent entailed that the Plaintiff has no clear right to the relief being sought. Conversely, that the Plaintiff has failed to disclose a serious question to be tried before this Court. · 5.7. The Defendant went on to discuss the unlikelihood of the Plaintiff suffering irreparable injury should the interim R6 relief not be granted . In so doing, the cases of Mobile Oil Zambia Limited vs. Msiska, Lundwa141 and Blackwell Railway Company vs. Cross151 as well as American Cyanamid131 were cited. 5.8. It was submitted th at the parties freely and voluntarily agreed on a break fee in th e event th at the Agreement was terminated. That this was a pre-agreed measure of damages and as such the damages will be paid if breach is proved. 5.9. As regards status quo and balance of convenience, it was submitted that the grant of the interim relief will disrupt the status quo. It was asserted that since the termination of the agreement on 7 th September, 2023 , the parties have not been bound by it. That granting an interim measure will create new conditions between the parties that has not existed since termination of the Agreement. 6. Hearing of the Application. 6 .1. The application was heard on 12th February, 2024. Both parties were represented by Counsel. 6.2. On behalf of the Plaintiff, Mr. Ndalemeta informed the Court that he was relying on the documents filed in support of the Originating Summons. 6.3. Counsel urged the Court to grant the relief sought. R7 6.4. Mr. Chama, Counsel for the Defendants opposed the application. He relied on the affidavit in opposition filed on 12th January, 2024. 6.5. In addition, Counsel referred the Court to clauses 3.8, 4 .3 , 4 .6.2, 4.6.4 and 4.7. in the Agreement dated 21 st December, 2021, asserting that the clauses were key in determining this matter. Counsel went on to give a sequence of events from the time when the contract was signed upto when the Plaintiff withdrew the Escrow amount on 27th October, 2023. 6. 6. Counsel urged the Court to dismiss the application on account that the tribunal has been constituted and there is no urgency. That the Plaintiff has thus not complied with Section 11 (4) of the Arbitration Act. 6. 7. The second ground as to why the application should fail was that the Plaintiff has not come to equity with clean hands. That the Plaintiff wants the Defendants to perform it's obligation under Clause 4.6 whilst, it is not performing its obligation. 6.8. It was further argued that damages are sufficient remedy should there be any breach on the part of the Defendants. That the parties agreed on break fee of $500,000 which allowed either party to terminate for any reason. 6.9. The last reason advanced as to why the application should fail was that granting the interim relief would disrupt the status quo between the parties . The relevant status being R8 that the contract stood terminated at th e time when this action was commenced. 6.10. Counsel prayed that the application be dismissed. 6.11. In reply, Mr. Ndalemeta, submitted that contrary to Counsel's submission, no agreement was terminated within the termination clause. 6.12. As regards the prerequisite under Section 11 of the Arbitration Act, Counsel submitted that the Arbitral Tribunal is only fully constituted when fees are agreed by the parties. Counsel's contention was that the fees are not yet agreed as was evident from exhibit "SM 1". 6 .13. That in the event that the Court would agree that the tribunal has been constituted, then these proceedings should be adjourned to the tribunal for consideration. 6. 14. It was Counsel's further submissions that the Defendants' arguments based on p rinciples of granting an injunction are not applicable to the present application. 6 . 15. Counsel urged the Court to consider the import of section 11 of the Arbitration Act and leave the consideration of merits of the matter to the tribunal. 7. Consideration and Determination. 7 .1. I have considered all the evidence and the submissions by the parties. It is common cause that the parties executed an Agreement for the sale and purchase of the sale shares in Micro Finance Zambia Limited on 21 st December, 2021. R9 The Agreement is exhibited as "CMS 1" in the Plaintiffs affidavit in support of Originating Summons. 7.2. Clause 25.2 of the Sale Shares Agreement is an Arbitration Clause enjoining the parties to refer to arbitration any dispute that may arise in connection with the Agreement. The parties' choice of dispute resolution was therefore arbitration. 7.3. It is apparent and agreed by the parties that a dispute has arisen pertaining to the termination of the Sale Shares Agreement. The Notice of Termination of the Agreement dated 8 th August, 2023 was exhibited as "CM 3 ". 7. 4. The Plain tiffs apprehension 1s therefore that the Defendants may interfere with the issued shares in Micro Finance Zambia Limited before the dispute is resolved at arbitration. 7 .5. The Plaintiff has thus invoked the provisions of section 11 of the Arbitration Act which empowers the Court to grant interim measures of protection to any party before or during arbitral proceedings. 7 .6. Subsection (2) of section 11 sets out the reliefs the Court can grant upon request and one such measure is an Order for the preservation of the subject matter of the dispute. 7. 7. Subsection 4 of Section 11 of the Arbitration Act enacts as follows: "4. The Court shall not grant an order or injunction under this section unless- RlO a) the arbitral tribunal has not yet been appointed and the matter is urgent; b) the arbitral tribunal is not competent to grant the order or injunction; or c) the urgency of the matter makes it impracticable to seek such order or injunction from the arbitral tribunal; and the Court shall not grant any order or injunction where the arbitral tribunal, being competent to grant the order or injunction, has already determined an application therefore". 7 .8. The above provision which is couch ed in mandatory terms clearly sets out th e instances wh en the Court will invoke its powers u n der section 11 of the Act. 7. 9. The Court will only grant the interim m easure of protection wh ere the tribunal h as n ot yet been a ppoin ted and the matter is urgent, or that the tribu n al is not competent to grant the order or injunction. 7 .10. It is trite that at th e time wh en this application was filed, only the Plaintiff h ad appointed its party appointed Arbitrator. 7 .11. At th e time of hearing, the Defendan t had equally appointed its pa rty ap pointed Arbitrator whilst the third arbitrator was a ppointed by the two party appointed Arb itrators . 7 .1 2. The Defen dant's argument was that a Trib unal h as since been constituted a n d as such this Court is precluded from Rll granting the interim measure of protection. The Plaintiffs argument was that an arbitral tribunal is only constituted when fees are agreed. This argument by the Plaintiff is not backed by any legal provisions. A tribunal is constituted once the Arbitrator is appointed and the appointment is accepted. 7 .13. The email correspondences exhibited by the Defendant clearly establish that the three Arbitrators have been appointed and as such a three member Arbitral Tribunal has been constituted. 7 .14. Having established that a tribunal has been properly constituted in this matter, and bearing in mind the provisions of section 11 (4) of the Arbitration Act, I am of the view that the tribunal is most suited to grant the interim order of protection that the Plaintiff is seeking. 7.15. I therefore agree with the Defendant's submission that the prerequisite under section 11 (4) of the Arbitration Act, upon which this Court can invoke its powers to grant an interim order of protection has not been met. The fact that an Arbitral Tribunal has been appointed divests this Court of jurisdiction to grant the relief being sought. 7.16. As regards the second limb of the prerequisite under section 11 (4) of the Arbitration Act, which is the urgency of the matter the Plaintiff has not endeavored to demonstrate the urgency of the matter. R12 7 .17. There was no evidence to suggest that the Defendant was about to dispose of the share or to conduct business in a way that would affect the issued shares in the 3 rd Defendant. 7 .18. On account of the fore going, this Court cannot grant the interim relief sought as doing so will be an affront to section 11 (4) of the Arbitration Act which precludes this Court to grant an interim relief of the kind that the Plaintiff is seeking when a tribunal has been appointed. 7 .19. The Plaintiff should apply before the tribunal for the interim measure of p rotection. 7 .20. Consequently, the application before this Court 1s not granted. 7 .21. On account that at the time when this action was commenced, the three member tribunal had not been appointed and or constituted, I Order that each party will bear its own costs. 7.22. Leave to appeal is granted. Delivered at Lusaka this 23 rd day of February, 2024 . ..................... ....... . Chilombo Bridget Maka HIGH COURT JUDGE R13