REPORTABLE
ZLR (12)
Judgment
No. SC 22/03
Civil
Appeal No. 382/2000
ARTHUR
ERNEST HENRY NICHOLAS ROBIN BEAZLEY N.O. v
(1)
TERRENCE COLIN KABELL
(2) HIPPO
VALLEY ESTATES LIMITED
SUPREME
COURT OF ZIMBABWE
SANDURA JA,
MALABA JA & GWAUNZA JA
HARARE,
JULY 21 & SEPTEMBER 11, 2003
J
C Andersen SC,
for the appellant
No
appearance for the first respondent
A
P de Bourbon SC,
for the second respondent
SANDURA JA:
This is an appeal against a judgment of the High Court which
dismissed the appellants application for
an order setting aside
the determination by the first respondent (the arbitrator) that
the termination of the contract involving
the construction of
Mteri Dam (the dam) was valid.
The
factual background is as follows. In May 1994 the second respondent
(Hippo) and Main Contracting (Private) Limited (Main),
now in liquidation, concluded an agreement in terms of which Main
undertook to construct the dam in Chiredzi District. The consulting
engineer responsible was Hart Frost (the engineer).
It
was expressly agreed that Main was to build the retaining wall so
that it would store water by 1 October 1995, that the
dam
construction had to be advanced to the stage where water could be
released into the canal by 31 January 1996, and that all
the
work had to be completed by 31 May 1996.
Subsequently,
after the work had commenced and a number of site meetings had been
held, at which concern about the rate of progress
had been expressed,
the engineer wrote to Hippo on 15 June 1995 as follows:
It
is with extreme regret that it is necessary for us to advise you that
in our opinion Main Contracting (Pvt) Ltd have failed to
proceed with
Mteri Dam construction in accordance with the contract and we do
not consider it possible for them to complete
the work by the
required completion date.
With
reference to their contract programme they are, on various critical
items, from 3.5 months to 7.5 months behind, after being
on site for
approximately twelve months. They have repeatedly revised their
programme but in every instance they have failed to
maintain their
programmed production rates.
We hereby
certify, in terms of clause 65 of the General Conditions of
Contract, 4th Edition,
that in our opinion Main Contracting (Pvt) Ltd, the Contractor,
has failed to proceed with the Works with due diligence
and is not
executing the Works in accordance with the Contract and is
persistently neglecting to carry out his (sic)
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to set aside the arbitrators finding that the contract had been
validly terminated, the appellant appealed to this Court.
Article 34(2)(b)(ii)
of the UNCITRAL Model Law, in relevant part, reads as follows:
An
arbitral award may be set aside by the High Court only if
(a)
(b) the
High Court finds that
(i)
; or
(ii) the award is in conflict
with the public policy of Zimbabwe.
Expanding on what is in conflict
with the public policy of Zimbabwe, Article 34(5) states:
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.
It has been
the policy of this Court to restrictively construe what is in
conflict with the public policy of Zimbabwe in order to
recognise the
basic objective of finality in arbitrations. Thus, in Zimbabwe
Electricity Supply Authority v Maposa,
1999 (2) ZLR 452 (S) at 465 C-D, GUBBAY CJ, with whom
I concurred, said:
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 recognise the basic
objective of finality in all arbitrations; and to hold such defence
applicable only if some fundamental principle of law or morality or
justice is violated. This is illustrated by dicta
in many cases
.
Emphasising the fact that under
Article 34 the High Court does not exercise an appeal power, the
learned CHIEF JUSTICE said
the following at 466 E-G:
Under
article 34 or 36, the court does not exercise an appeal power
and either uphold or set aside or decline to recognise and
enforce an
award by having regard to what it considers should have been the
correct decision. Where, however, the reasoning or
conclusion in an
award goes beyond mere faultiness or incorrectness and constitutes a
palpable inequity that is so far reaching and
outrageous in its
defiance of logic or accepted moral standards that a sensible and
fair minded person would consider that the conception
of justice in
Zimbabwe would be intolerably hurt by the award, then it would be
contrary to public policy to uphold it.
The
same consequence applies where the arbitrator has not applied his
mind to the question or has totally misunderstood the issue,
and the
resultant injustice reaches the point mentioned above.
The learned
judge in the court a quo
was aware of the above test and applied it in determining the
application before him. The issue which now arises is whether he
correctly applied the test when he declined to set aside the award.
I have no doubt in my mind that he did.
The
first issue which I shall deal with is the appellants contention
that before the contract was terminated in terms of clause 65(1)
for slow progress, a notice in writing should have been served upon
Main in terms of clause 46. That clause, in relevant part,
reads as follows:
Should the Engineer at
any time be of the opinion that the rate of progress of the Works or
any part thereof is too slow to ensure
the completion of the Works or
any part thereof by the prescribed time or extended time for
completion, he shall so notify the Contractor
in writing and the
Contractor shall thereupon, with the approval of the Engineer, take
such steps as the Contractor may think necessary
to expedite progress
so as to complete the Works by the prescribed time or extended time
for completion.
It
was common cause that no notice was given to Main by the engineer in
terms of clause 46 before Hippo terminated the contract
in terms
of clause 65(1) of the contract. Clause 65(1), in
relevant part, reads as follows:
if the Engineer shall
certify in writing to the Employer that in his opinion the Contractor
(a) - (b)
, or
(c) has failed to proceed with
the Works with due diligence, or
(d)
,
or
(e) is
not executing the Works in accordance with the Contract or is
persistently or flagrantly neglecting to carry out his obligations
under the Contract, or
(f) - (g)
,
then the Employer may, after
giving seven days notice in writing to the Contractor,
enter
upon the Site and the Works and expel
the Contractor therefrom
.
After
considering the provisions of clauses 46 and 65(1), the learned judge
concluded that compliance with clause 46 was not
a necessary
prerequisite to the termination of the contract in terms of
clause 65(1), but that ordinarily clause 46 would
be
applied. He added that the arbitrator was wrong in finding that the
engineer should not have given proper notice to Main.
He, however,
found that no substantial injustice had resulted because the
documents placed before the arbitrator reflected continuous
warnings
and complaints about the slow progress. In this regard, the learned
judge said:
there was a very
substantial amount of evidence before the Arbitrator that the
Applicant Company was very much behind in its work
programme. There
was substantial documentation, including various site minutes,
reflecting this to be the case. There was various
detailed
documentation indicative of substantial inability of the Applicant
Company to keep anything like up-to-date with the time
requirements
in what is common cause was a very tight contract. The
documentation clearly reflects continuing warnings and complaints
given to the Applicants Company and indicates revised programmes
being put in place which were not adhered to. So while I am
of the
view that the Arbitrator was wrong in not requiring Clause 46 to
have been followed, I am not satisfied that the failure
shows any
substantial injustice to the Applicant.
I
entirely agree with those comments and observations. The documents
before the arbitrator graphically indicated that Main had
fallen
behind schedule in a serious way.
In
addition, I am satisfied that compliance with clause 46 is not a
necessary prerequisite to the termination of a contract
in terms of
clause 65(1). That opinion is supported by the learned author
Philip Loots who, at p 212 of Engineering
and Construction Law,
comments on clause 46 as follows:
Notification of Slow Rate
of Progress
If the Engineer does not warn the
Contractor under this Clause, that by itself will not affect the
Employers right of forfeiture
or to penalties for delay in
completing.
In
the circumstances, the failure by the engineer to notify Main of the
slow rate of progress in terms of clause 46, before
the contract
was terminated in terms of clause 65(1), cannot be a basis for
the conclusion that the arbitral award made in favour
of Hippo is in
conflict with the public policy of Zimbabwe. I am satisfied that
the test set out in Maposas
case supra
has not been satisfied in this regard.
The
second issue which I wish to consider relates to a preliminary
application for leave to adduce further evidence which was made
to
the learned judge by the appellant and which was dismissed. It was
in the form of a Chamber application filed on 24 September
1999.
The
additional evidence which the appellant intended to adduce was in
documentary form and essentially related to the unavailability
of
core material in certain designated areas. The core material is an
impervious material required in the construction of the dam
wall.
The documents consisted of correspondence between the engineer, Hippo
and Stocks & Stocks (Private) Limited, the company
which replaced
Main on the dam project, and were dated between July 1995 and January
1996.
In
the exercise of his discretion, the learned judge did not consider it
appropriate to grant the application to lead further evidence
for two
main reasons.
The
first reason was that the application had been filed very late. The
additional evidence was available when the application
for an order
setting aside the arbitral awards was filed on 13 November 1998.
It was only on 24 September 1999, virtually
a year later, and
close to the initial date set for the hearing of the main application
(i.e. 5 October 1999) that the Chamber
application for further
evidence to be adduced was filed.
The
second reason given by the learned judge was that since the most
important aspect of the application related to the shortage
of core
material which was imminent when the contract was terminated, and the
documents before the arbitrator clearly indicated that
the shortage
had been noted, commented upon and raised as a serious problem, the
arbitrator must have been fully aware of the problems
relating to the
shortage of the material and the consequence of such a shortage on
the contract.
It
is well established that this Court will not interfere with the
exercise of a judicial discretion unless it was exercised on
wrong
principles or the primary court mistook the facts or did not take
into account some relevant considerations or allowed extraneous
or
irrelevant matters to guide it. See Barros
and Anor v Chimphonda
1999 (1) ZLR 58 (S) at 62F-63A. In the present case, I am satisfied
that the appellant has not shown that the learned judge exercised
his
discretion improperly. The application for leave to adduce further
evidence was, therefore, properly dismissed.
The third issue, which I now deal
with, is the refusal by the arbitrator to allow certain documents to
be produced by Main at the
hearing. These documents were in respect
of what happened after the contract had been terminated. They
included the contract
between Hippo and Stock & Stocks, the
company which replaced Main on the dam project, and correspondence
between the engineer,
Hippo and Stocks & Stocks. The arbitrator
excluded these documents because, in his view, whatever took place
after the termination
of the contract was not relevant to the
proceedings before him.
Commenting on the arbitrators
decision to exclude the documents, the learned judge said:
In
my view, the Arbitrator should have allowed the documents that
Mr Andersen
requested to be placed before him to be included in the Arbitration
proceedings. As a general principle, all papers wanted by each
party should have been placed before the Arbitrator. I am, however,
satisfied that the papers filed covered all the main issues
which the
Arbitrator needed to consider. Although it was wrong for the
Arbitrator not to allow the additional papers to be filed,
I am
satisfied that this did not in any way preclude him from fairly
determining the matter. It did not result, in my view, in
a failure
of justice to either party to any material extent.
I would once again emphasise that
there was a profusion of detailed papers put before the Arbitrator.
Each party had substantial
opportunity to reply to the other partys
submissions and re-reply and put forward any documents and the
arbitrator had a large
volume of documents before him.
I
agree entirely with the views expressed by the learned judge.
However, I wish to add that when the arbitration proceedings
commenced
in January 1996 the parties were given an opportunity to
lead further evidence and call witnesses if they wished, but both
chose
not to do so. If Main considered the unavailability of the
core material to be crucial to its case, it should have led further
evidence on the matter. Instead, it left unsubstantiated the
suggestion in its papers that the engineer, on whose recommendation
Hippo terminated the contract, had an ulterior motive for the
termination of the contract, which was the avoidance of the
consequences
of his own failure to designate areas with sufficient
core material.
In the circumstances, I agree
with the learned judge that the refusal by the arbitrator to allow
Main to produce the documents in
question did not result in a failure
of justice to either party to any material extent. It, therefore,
follows that the said refusal
cannot be a basis for the appellants
contention that the arbitral award is in conflict with the public
policy of Zimbabwe.
Finally, I would like to consider
whether, taking into account all the facts in this case, the finding
by the arbitrator that the
termination of the contract was
reasonable, justified and valid is in conflict with the public policy
of Zimbabwe according to the
criteria set by this Court in Maposas
case supra.
I have no doubt that it is not.
In my view, bearing in mind,
inter alia,
that there was overwhelming evidence before the arbitrator that Main
was very much behind its work programme, that revised programmes
were
put in place by Main, but were never adhered to, and that many
complaints had been made to Main about the slow rate of progress
at
various site meetings without yielding any positive results, I do not
think that it can be said that the award made by the arbitrator
constitutes a palpable inequity that is so far reaching and
outrageous in its defiance of logic or accepted moral standards that
a sensible and fair minded person would consider that the conception
of justice in Zimbabwe would be intolerably hurt by the award.
In the circumstances, the appeal
is devoid of merit and is dismissed with costs.
MALABA JA: I agree.
GWAUNZA
JA: I agree.
Honey
& Blanckenberg,
appellant's legal practitioners
Scanlen
& Holderness,
second respondent's legal practitioners