Conplant Technology Private Limited Versus Wentspring Investments Private Limited

Case Name: Conplant Technology Private Limited Versus Wentspring Investments Private Limited

High Court of Zimbabwe        

Mafusire J

Harare, 15 & 28 September 2015, 16 December 2015

Civil Trial-Arbitration Clause

B Diza, Wilmot & Bennett Legal Practitioners for the Plaintiff.

D Trivador, Gill, Godlonton & Gerrans Legal Practitioners for the Defendant.

Facts:

The plaintiff’s claim was for the payment of a sum of money with regards to labour and materials supplied to, for and on behalf of the defendant, at the defendant’s special instance and request. The defendant requested from the plaintiff through a written contract, installation of a water pump station, procurement and installation of water pumps and to connect them to an existing water reticulation system. The plaintiff claimed to have done the job in accordance with the contract, but the defendant neglected to pay. The total cost of the labour and material amounted to US $32 960.00 and an additional US$3 296.00 which was claimed by the plaintiff as commission. As a result of the failure to pay the two amounts, the plaintiff issued summons for payment of these two amounts. The defendant filed a special plea and a plea on merits, submitting that the contract contained an arbitration clause which obliged both parties to settle any dispute between them by arbitration. Furthermore, the defendant averred that the plaintiff had circumvented local authority in the procurement of the water pumps as such procured the wrong pumps, resulting in the pumps being rejected, thus making the defendant cancel the contract due to such breach.

Issues raised

• The main issue was whether or not the trial should be stayed and the dispute be referred to arbitration in terms of an arbitration clause in the contract between the parties.

Arguments of the parties

Plaintiff’s Argument

The plaintiff relied on four grounds for its argument, where the first two appeared in replication and the last two were in written submissions or heads of arguments. The grounds are as follows:

• Resistance to referral to arbitration as the defendant had failed to do so by cancelling the contract, but is seeking referral to arbitration upon receipt of summons to pay for the labour, supply of materials and commission.
• Arbitration clause could not be read as ousting the inherent jurisdiction of the High Court and such objection by the defendant was purely academic.
• Arbitration clause in the contract had not been intended to be the procedure of first instance. The plaintiff relied on the case of Shell Zimbabwe Private Limited v Zimsa Private Limited where it was stated that an arbitration clause could not have the effect of persuading the court to refer the matter to arbitration.[1]
• The adjudicator that had been appointed in the contract, could not be expected to be impartial or unbiased because it was a firm of engineers who happened to be the defendant’s own consulting engineers.

Defendant’s argument

The defendant responded to the grounds stated by the plaintiff as follows:

• In reference to the plaintiff’s first ground, the defendant stated that what is referred to arbitration is a dispute and cancellation of a contract did not fall within the ambits of a dispute.
• On the second ground, the defendant argued that it was a question of enforcing the contract between the parties and not ousting the jurisdiction of the court.
• The Shell Zimbabwe Private Limited v Zimsa Private Limited case cited by the plaintiff was argued against by the defendant as having been wrongly decided and cited its own cases where an arbitration clause in a contract was considered and upon request by either parties, the dispute was referred to arbitration.[2] The cases relied upon were:
• Independence Mining Private Limited v Fawcett Security Operations.[3]
• Zimbabwe Broadcasting Corporation v Flame Lily Broadcasting Private Limited.[4]
• PTA Bank v Elanne (Pvt) Limited & Ors.[5]
• Capital Alliance (Pvt) Limited v Renaissance Merchant Bank Limited & Ors.[6]
• The defendant responded to the fourth ground by stating that where the adjudicator was concerned, the plaintiff could have easily moved for the appointment of a neutral adjudicator.

Judgement/final decision

• The proceedings in HC 1033/15 were stayed.
• The dispute between the parties in this case was referred for resolution by arbitration in accordance with the provisions of the agreement between the parties under the NJPC 2000 Building Direct Contract dated 30 August 2011.
• Costs were in the cause.

Legal reasoning/ratio decidendi

The Law

Article 11(1) of the New York Convention, defines an arbitration agreement as “an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship whether contractual or not, concerning a subject matter capable of settlement by arbitration.”[7]  Article 8 (1) of the Model Law further explains that “a court of law before which proceedings are brought in a matter which is 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.”[8] Relying on Article 8 (1), Mafusire J established that “a clause in a contract to refer a dispute to arbitration is binding on the parties and a party is not at liberty to resile from that clause any time he may wish to do so.”

Article 8 presents a condition that must be met before application for stay of proceedings and that condition is that there needs to be a dispute.[9] In the PTA Bank case, the defendant had not stipulated the existence of a dispute and thus the court declined the request for referral. It further noted that in the absence of a dispute there is no need or nothing to refer to arbitration.[10] The court in the Zimbabwe Broadcasting Corporation case, established that a mere request by either party to refer the dispute to arbitration will often result in the court declining such request. However, as was noted in the case, upon the defendant’s pleading to the merits a dispute was then said to exist as such leading the court to exercise its discretion and stay the proceedings.[11] In casu, the defendant met the condition by leading on merits. The condition is established in Article 8 of the Model Law where referral must not be null and void or incapable of being performed.[12]

In an analysis of the plaintiff’s first ground which did not succeed Mafusire J, relied on the case of Bitumat Limited v Multicom Limited[13] where Smith J in his ratio decidendi stated:

“it may well be that at some stage after the dispute has risen because of changed circumstances, the parties concerned agree that the matter should be determined by court of law, rather than by arbitration in terms of the agreement in question. In these circumstances the decision of the parties to abandon the arbitration clause in their agreement must be specific and clearly evidenced. It cannot be implied by the conduct of or correspondence between the parties, it must be explicit. After all if the arbitration clause is contained in a written agreement, then the decision to change the agreement must either be in writing or else so clearly evidenced by the conduct of the parties that there is no room for doubt.” The first ground also failed to succeed as a result of the plaintiff through its legal practitioners, gave the defendant an ultimatum to pay the stipulated amounts and stated that failure to do so would result in the plaintiff referring the matter to the adjudicators but instead approached the court.

The learned Judge dismissed the second ground citing it as being misconceived and explained that the issue was not centralised on the ousting of the inherent jurisdiction of the court but on enforcing a contractual provision. On the third ground Mafusire J averred that the Shell Zimbabwe Private Limited case, arbitration agreement contained the term mediation and in casu they preferred to use adjudication.[14] The ratio decidendi of her Ladyship’s decision was two pronged, “The first approach was that for a court to stay proceedings in terms of the Arbitration Act, the clause must be clear and unequivocal and intended arbitration to be the first instance in resolving disputes. Secondly the jurisprudential grounds underlying arbitration as a dispute mechanism are speed where arbitration can yield results and contractual party autonomy of the parties to resolve problems.”[15]

Mafusire J held obiter dicta:

 “in my view being industry specific arbitration may be a more expedient dispute resolution mechanism in that experts in the fields concerned would be chosen for their expertise to constitute the arbitral tribunal. However, I imagine that experts in their fields can readily appreciate and blend factual issues much faster thereby expediting the process.”

The learned Judge also concurred with the approach in the Waste Management Services v City of Harare case, where it was held that the court had no discretion to decide not to where one party requests for a referral to arbitration.[16] On the fourth ground, the learned Judge dismissed the ground citing that the parties could have anticipated the adjudicator being biased and that the plaintiff could have requested the appointment of a replacement. Furthermore, in the two letters sent to the defendant by the plaintiff, the plaintiff had proposed an alternative adjudicator but never followed through on the proposal. 

Conclusion/Observation

A multi-tiered approach is a strategic approach that ensures speedy resolution to a dispute and is a strategic tool which encompasses negotiation, mediation and conciliation resorting to arbitration or litigation. Kanokanga posits that alternative dispute resolution is not an alternative to litigation but a fundamental component of modern legal systems that deliver real and timely justice.[17] Esteemed scholars converge on the idea that dispute resolution clauses are “a provision in the contract that requires parties to attempt to resolve disputes through a series of escalating steps such as negotiation and arbitration.”[18]

REFERENCE(S):

Legislation

Arbitration Act [Chapter 7:15]

UNCITRAL Model Law on International Commercial Arbitration as amended and incorporated in the First Schedule of Arbitration Act.

Cases

Shell Zimbabwe (Pvt) Limited v Zimsa Pvt Limited [2007] (2) ZLR 366 (H).

Independence Mining (Pvt) Limited v Fawcett Security Operations [1991] (1) ZLR 628 (H).

Zimbabwe Broadcasting Corporation v Flame Lilly Broadcasting (Pvt) Limited [1999] (2) ZLR 448 (H).

PTA Bank v Elanne (Pvt) Limited & Ors [2000] (1) ZLR 156 (H).

Capital Alliance (Pvt) Limited v Renaissance Merchant Bank Limited & Ors [2006] (2) ZLR 232 (H).

Waste Management Services v City of Harare [2000] (1) ZLR 172 (H).

Books

 Kanokanga D ‘Commercial Arbitration in Zimbabwe’ (2020).

 Blackaby N, Partasides C & Redfern A ‘Redfern and Hunter on International Arbitration’ (2022) 7^th Ed Oxford.

[1] Shell Zimbabwe (Pvt) Limited v Zimsa (Pvt) Limited 2007 (2) ZLR 366 (H).

[2] Ibid.

[3] Independence Mining (Pvt) Limited v Fawcett Security Operations 1991 (1) ZLR 628 (H).

[4] Zimbabwe Broadcasting Corporation v Flame Lilly Broadcasting (Pvt) Limited 1999 (2) ZLR 448 (H).

[5] PTA Bank v Elanne (Pvt) Limited & Ors 2000 (1) ZLR 156 (H).

[6] Capital Alliance (Pvt) Limited v Renaissance Merchant Bank Limited & Ors 2006 (2) ZLR 232 (H).

[7] Article 11 (1) of the Model Law First Schedule to the Arbitration Act [Chapter 7:15].

[8] Article 8 (1) of the Model Law First Schedule to the Arbitration Act [Chapter 7:15].

[9] Ibid.

[10] PTA Bank v Elanne Pvt Limited & Ors 2000 (1) ZLR 156 (H).

[11] Zimbabwe Broadcasting Corporation v Flame Lilly Broadcasting Pvt Limited 1999 (2) ZLR 448 (H).

[12] Article 8 of the Model Law First Schedule to the Arbitration Act Chapter 7:15.

[13] Bitumat Ltd v Multicom Ltd 2000 (1) ZLR 637 (H) at 640 A-C.

[14] Shell Zimbabwe Private Limited v Zimsa Private Limited 2007 (2) ZLR 366 (H).

[15] Ibid.

[16] Waste Management Services v City of Harare 2000 (1) ZLR 172 (H).

[17] David Kanokanga, ‘Commercial Arbitration in Zimbabwe’ (2020) 4.

[18] Nigel Blackabay, Constantine Partasides & Alan Redfern, ‘Redfern and Hunter on International Arbitration’ (2022) 7^th Ed Oxford.