CITY OF HARARE v FURBANK TRADING (PRIVATE) LIMITED (336 of 2024) [2024] ZWHHC 336 (6 August 2024)

1 HH 336 - 24 HC 972/20 CITY OF HARARE versus FURBANK TRADING (PRIVATE) LIMITED HIGH COURT OF ZIMBABWE CHINAMORA J HARARE, 6 August 2024 Opposed application Mr C Kwaramba, for the applicant Mr D Halimani, for the respondent CHINAMORA J: This is a court application for the setting aside of an arbitral award dated 22 December 2019, which was rendered by Mr. Thomas Alexander Taylor. The brief background is as follows: The respondent submitted a claim for arbitration stating that sometime in July 2018, it was awarded a tender by the applicant’s Procurement Management Unit for the supply and delivery of bitumen products for emergency road rehabilitation. A contract was subsequently executed between the parties for the supply and delivery of the said bitumen products on certain terms and conditions. The material terms of the contract were that: (a) the respondent was entitled to order as and when there was need; (b) the applicant was entitled to inspect, analyse and test the material supplied; (c) the respondent was obliged to deliver the products which met the agreed approved specifications in terms of the contract. (d) the applicant was bound to pay the respondent within 60 (sixty) days of delivery and receipt of the invoice. (e) the total contract price was US$ 1 497 500.00 In due course, the applicant made orders of bitumen products and the respondent supplied the same for a grand total of US$ 468 855.00. Following delivery of the aforesaid products, on a date in May 2019, the respondent presented its invoice for payment as agreed. The applicant acknowledged its indebtedness to the respondent through a memorandum dated 31 May 2019. Despite this, the debt was not settled resulting in the matter being referred to arbitration as I have stated above. The applicant opposed the respondent’s claim and gave two HH 336 - 24 HC 972/20 reasons. Firstly, the applicant denied that the memorandum constituted an acknowledgment of debt. The second basis was that, in light of Statutory Instrument 33 of 2019, the amount due to respondent ought to be settled in RTGS at the rate of One United States Dollar to one RTGS Dollar (ZWL dollar). The arbitrator’s ruling was couched as follows: “Accordingly, I make the following award in favour of the claimant, [namely] that the respondent pay to the claimant: - a) The RTGS equivalent of the sum at the sum of US$ 468 855 at the prevailing b) interbank exchange rate at the date of full and final payment. Interest on the above sum at the prescribed rate with effect from 26 July 2019 to date of full and final payment…” It is this award that the applicant seeks to have set aside. In essence, the relief sought by the applicant is that, the arbitral award rendered by the arbitrator be set aside in its entirety on the basis that it was contrary to the public policy of Zimbabwe. Let me refer to what the law on the subject says. The grounds upon which a court can vacate an arbitral award are delineated in Article 34 (2) of the Model Law, which is a Schedule to the Arbitration Act [Chapter 7:15] and that is an award may be set aside if it is in conflict with the public policy of Zimbabwe. Consequently, the sole question for determination in the present matter is whether or not the award made by the arbitrator is contrary to public policy as alleged. In my view, the arbitrator made a finding that the applicant incurred an obligation towards the respondent after the first effective date and, therefore, should pay the respondent the RTGS equivalence of the United States Dollar as contemplated by section 22 (e) of the Finance Act (No.2) of 2019. My view is that the arbitrator’s finding and ruling is consistent with the law. The award is not contrary to public policy. A reading of the arbitrator's award clearly shows that the established facts and applicable law are in tandem. On pages 64-65 of the record (being the award), after considering the submissions made by both parties the arbitrator noted that: “Two factors must therefore be present to legally support payment in RTGS dollars converted at the interbank market rate - one the products must have been imported and the second is that the liability must have been incurred after the first effective date. It is the claimant's position that the debt being claimed was incurred in May 2019, that is after the first effective date and it was incurred in foreign currency with the consent and understanding of the respondent. The respondent on the other hand submits that the transaction and therefore the obligation "is a local obligation.” The arbitrator continued his assessment of the evidence as follows: “The claimant has in a separate submission, in reply to a query from the arbitrator, proved conclusively that the product was imported and from South Africa and the liability was incurred in Rand the currency of that country. I have reviewed the documents submitted as HH 336 - 24 HC 972/20 proof and am satisfied that the product was imported. And I am satisfied from the various documents submitted by the claimant that the liability was incurred after the first effective date. In summary therefore I am satisfied that the claimant is entitled to payment of the Zimbabwe dollar equivalent of the US$468,855 as it delivered the products in May and therefore the date on which the debt was incurred was after the first effective date and as the product was imported from South Africa.” The cogency of the above findings is self-evident, and the arbitrator cannot for his conclusion. I find nothing contrary to public policy since Section 22 (e) of the Finance Act (No.2) of 2019 supports the conclusion reached by the arbitrator. The provision reads: “Subject to section 5, for the purposes of section 44C of the principal Act, the Minister shall be deemed to have prescribed the following with effect from the first effective date: (e) that after the first effective date any variance from the opening parity rate shall be determined from time to time by the rate or rates at which authorized dealers exchange the RTGS dollar for the United States dollar on a willing-seller, willing- buyer basis.” The arbitrator found that the debt which is being claimed was incurred in May 2019 and this debt was incurred in foreign currency (Rand) with the knowledge and consent of the respondent. That being the case, the arbitrator invoked section 22 (e) of the Finance Act (No.2) of 2019 cited above. In this respect, it is helpful to observe that Makwindi Oil Procurement (Pvt) Ltd v National Oil Co of Zimbabwe (Pvt) Ltd 1989 (3) SA 191 (ZS) is authority for the proposition that a judgment sounding in foreign currency may be given subject to the amount of the foreign currency being converted into local currency at the date of enforcement of the judgment. See also Karonga v Zimbabwe Leaf Tobacco Co and Anor. HH 64-16. Quite evidently, the arbitrator's award complies with both the statutory provision and case law authorities. Let me add that, I do not find anything that is contrary to public policy of Zimbabwe in the award by the arbitrator. The locus classic in applications to set aside arbitral awards is worth referring to. In Zimbabwe Electricity Supply Authority v Maposa 1999 (2) ZLR 452 (SC). GUBBAY CJ (as he then was) soundly stated that: “In my opinion, the approach to be adopted is to construe the public policy defence, as being applicable to either a foreign or domestic award, restrictively in order to preserve and recognize the basic objective of finality in all arbitrations; and to hold such defence applicable only if some fundamental principle of the law or morality or justice is violated.” I agree with the learned former Chief Justice’s view, and come to the conclusion that the award is beyond reproach in that in making his award the arbitrator found that, the respondent had supplied imported goods to the applicant after the first effective date and, notably, that the applicant had itself agreed to pay for these goods in foreign currency or its HH 336 - 24 HC 972/20 equivalent upon delivery. Therefore, the arbitrator not only upheld the parties' agreement but also correctly applied the law to the established facts. Having come to this conclusion, I am left to consider the issue of costs. Generally, costs follow the results, but are in the discretion of the court. The respondent has asked for costs on a punitive scale in the event the applicant was unsuccessful, I do propose to award costs at the higher level sought by the respondent, as I do not believe that the applicant has litigated mala fide. In the circumstances, I am in agreement with the position taken by CHITAPI J in Netone Cellular (Pvt) Ltd v Reward Kangai HH 441-19, that a party should not be penalized with punitive costs for holding a contrary legal position, since opposing arguments on the law enhance our jurisprudence. Therefore, in the exercise of my discretion I will award costs on the ordinary scale. In the result I make the following order: 1. The application be and is hereby dismissed 2. The applicant shall pay the respondent’s costs. CHINAMORA J: …………………………………………. Mbidzo, Muchadehama & Makoni, applicant’s legal practitioners Wintertons, respondent’s legal practitioners