Judgment No. HB 98/2002

                                                                                    Case No. HC 814/2002

 

ARTCRAFT FURNITURE MANUFACTURING

 

versus

 

TOKOZANI (PVT) LTD

 

and

 

RAJESH NARARINDAS HASSAMAL

 

and

 

SEAN WILLIAM JAMES REDDING

 

IN THE HIGH COURT OF ZIMBABWE

CHEDA J

BULAWAYO 12 JULY & 15 AUGUST 2002

 

Miss P Dube for the applicant

N Ndlovufor the respondent

 

Judgment

 

            CHEDA J:     On 21 May 2001 plaintiff (hereinafter referred to as

 

“applicant”) entered into an agreement of sale with 1st, 2nd and 3rd defendants

 

(hereinafter referred to as 1st, 2nd and 3rd respondents respectively).  First

 

Respondent agreed to purchase certain assets and stock from applicant.  One of the

 

terms of the agreement was that 1st respondent register a Notorial General Covering

 

Bond over the assets sold within 30 days of the date of sale.  The said bond was to be

 

in favour of applicant.  The bond was only registered on 30 January 2002.  It was clear

 

that registration was done outside the agreed time.  There is therefore a prima facie

 

breach of one of the terms of the agreement of sale.  As a result of this perceived

 

breach by 1st respondent applicant issued summons against 1st, 2nd and 3rd

 

respondents out of this court on 5 February 2002 for the sum of $1 824 586,30 which

 

was however amended to the sum of $1 562 081,69 as applicant conceded that it

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owed respondents the sum of $854 585,00, therefore applicant’s claim is for:

 

            (a)        $1 562 081,69 and

            (b)        interest thereto at the rate of 45% per annum from 1 February 2002 to                    date of full payment.

 

            Paragraph 1.4 of the contract reads:

 

            “The purchasers shall issue instruction to Lazarus and Sarif  Legal   Practitioners of Bulawayo to register a Notarial General Covering Bond over            the assets(annexure “A”) for the value of $4 200 000,00 (four million two      hundred dollars) in favour of the sellers to be lodged within 30 days from the        effective date of sale.”

 

            The effective date of sale is 31 May 2001 as stipulated by paragraph 5.1 of the

 

said agreement.  In response to the summons issued out of this court, 1st, 2nd and 3rd

 

respondents caused an appearance to defend to be entered through their legal

 

practitioner of record on 11 February 2002.  Applicant applied for summary judgment

 

on 20 March 2002 to which respondents opposed.  Mr Neville Rohan Buffee a

 

Director of applicant in his founding affidavit for the summary judgment avers that

 

respondent were in breach of the agreement by virtue of their failure to register a

 

Notarial General Covering Bond within 30 days as agreed.

 

            Clause 6 is a breach clause and it reads:

 

            “In the event that the purchasers fail to make any payment provided for herein       on due date or otherwise committing a breach of any of the conditions hereof,            and failing to make such payment or remedy such a breach within 14 days of        written notice, in addition and without prejudice to any other rights available at     law.

            6.1       To claim immediate payment of the balance of the purchase price                            together with any other amounts outstanding in terms of the agreement                        hereof; or

            6.2       ...

            6.3       ...”

 

            It is on the basis of clause 6.1 that applicant now prays that summary judgment

 

be granted in its favour.  Respondents oppose the application on the basis that:

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            (a)        they are not in breach as applicant only delivered the necessary                                documents for the registration of the bond in January 2002.

            (b)        applicant has withheld a lot of money which is necessary for the                              transfer fees for the registration of the bond.

            (c)        that applicant has waived its right to cancel the agreement as it                                continued to accept monthly rentals for the premises and the purchase                  price from the time it alleges that the breach took place.

            (d)       that summons was issued for other reasons because they were issued                       after the bond had been registered.

            (e)        that there was a verbal agreement whereby 1st respondent agreed to sell                 its products through applicant.

 

            It is pertinent to note that clause 6.6 of the said agreement stipulates that:

 

            “In the event that there should be any dispute concerning the interpretation or        implementation of this agreement excluding the purchaser’s obligation to     make payment such dispute shall be referred to the senior partner for the time     being of Lazarus and Sarif, Mr Charles Lazarus who shall resolve the dispute         in accordance with the principles of equity and fair play and whose written    determination shall be final and binding incapable of appeal.”

 

            At the hearing respondents raised a point in limine being that applicant was not

 

properly before the court as they were supposed to exhaust all the remedies provided

 

for in the agreement of sale.  They also argued that the arbitration clause specifically

 

states that the parties should bring this matter before an arbitrator in the event of a

 

dispute regarding the interpretation or implementation of this agreement.  The

 

question to be asked is whether the present dispute falls within the ambit of this court

 

or an arbitrator.  Miss Dube for applicant argued that this dispute is not for arbitration

 

as it does not deal with implementation but payment which is specifically excluded by

 

clause 6.6.  The Chambers Concise Dictionary 1988 defines implementation as “to

 

give effect to; to fulfill or perform”.  Arbitration is now an integral part of our

 

legal procedures for dispute resolution.  Arbitration is defined by Butler and Finsen,

 

Arbitration in SA Law & PracticeJuta & Co Cape Town 1993 at page 1 as:

 

 

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            “Arbitration is a procedure whereby the parties refer that dispute to a third             party, known as an arbitrator for a final decision after the arbitrator has first      impartially received and considered evidence and submissions from the parties.  The reference to the arbitrator takes place pursuant to an agreement           between the parties the arbitrator is resolving the dispute, is not an ordinary court of law but a person chosen by the parties.”

 

            Pursuant to this notion, our legislature passed the Arbitration Act Chapter 7:02

 

giving effect to the resolution of some disputes by arbitration.  In my view, therefore

 

there are two essential elements in determining whether or not a dispute qualifies for

 

arbitration, namely that the parties mutually agreed that in the event of a dispute such

 

dispute should be referred to arbitration and that a dispute is in existence.

 

            In the present matter it is apparent that these two elements are present, what,

 

however, is disputed is whether the dispute in question, that is, the registration of the

 

bond is excluded from being referred to the arbitrator.  The major question which falls

 

for determinations is whether or not the word “implementation” in the agreement

 

refers to the failure or otherwise of the registration of the bond.  The definition given

 

suprarefers to giving effect, fulfillment or performance of the said agreement of sale.

 

            Miss Dube argues that this matter is not covered by clause 6.6 as it deals with

 

payment only.  However Mr Ndlovu for respondents while admitting that indeed there

 

is a balance outstanding by respondent he goes further to argue that the whole matter

 

has to take a totally different dimension by virtue of the fact that applicant has

 

unlawfully withheld an amount of $854 585 and that the said breach of the agreement

 

of sale was occasioned by their failure to perform their part of the contract which

 

impeded the timeous registration of the bond.  An additional factor is an allegation of

 

a subsequent verbal agreement regarding the sale of 1st respondent products through

 

applicant.  These allegations can not certainly be resolved through the papers.

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            In my view there is a dispute of fact between the parties.  In as much as the

 

arbitration clause excludes reference to the arbitration, the other part of the said clause

 

deals with a dispute arising out of the implementation or interpretations of the

 

agreement.  The question is whether the dispute in question is to do with the

 

implementation or interpretation of the agreement of sale or is purely to deal with

 

payment.  In my view, the dispute would certainly have everything to do with payment

 

were it not for the self-help action by applicant in withholding what was otherwise

 

due to respondents.  What applicant did was not agreed to by the the respondents and

 

as such it was a unilateral decision in a mutual bilateral contract.  This conduct by

 

applicant on its own, unfortunately introduces a major element in the contract being 

 

the delay of the registration of the bond and this renders the implementation of

 

the agreement incapable of performance.  It is this conduct which raises a dispute in

 

this matter.  Much has been said about the meaning of interpretation and

 

implementation.  In deciding what the word implementation means, I am of the view

 

that regard must be had of the intention of the parties.

 

            A contract of this nature requires performance, therefore ordinarily, should

 

either party fail to perform the other should be able to institute legal proceedings to

 

assert his legal rights.  In the present case the parties specifically agreed that in the

 

event of a dispute in relation to the implementation, such dispute should be referred to

 

arbitration.  The word implementation, in my opinion should be given its ordinary

 

and everyday meaning bearing in mind the intention of the parties in commercial

 

transactions.  In Hillas & Co Ltd v Arcos Ltd 147 LTR 503 at 514 LORDWRIGHT

 

remarked;

 

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            “Businessmen often record the most important agreements in crude and      summary fashion; modes of expression sufficient and clear to them in the            course of their business may appear to those unfamiliar with the business far     from complete or precise.  It is ordinarily the duty of the court to constitute            such documents fairly and broadly without being too astute or subtle in finding        defects.”

 

            I am not in agreement with Miss Dube that the word implementation means

 

anything else other than performance which performance is now doubtful for different

 

reasons as held by the parties.  This document was drafted by the parties with a clear

 

intention and I am uncomfortable to strictly interpret the said clause with such

 

restriction so as to defeat the parties’ intention.

 

            In Union Governments v Smith 1935 AD 232 His Lordship WESSELSCJ had

 

this to say;

 

            “...We must look at the whole document, and if from other parts of the       document itself it appears that the parties did not intend the literal meaning to   convey their intention, or if to give them a literal meaning would result in an    absurdity, then we must reject the literal meaning and give the words the    meaning which the parties manifestly intended.”

 

            This dicta goes to show the extent the court go to give effect to the intention of

 

the parties.  In the present case the parties’ intention was to exclude the issue of

 

payment but I doubt if they intended to so exclude it where the other part would want

 

to use it where itself is prima facie culpable.

 

            I find that there is a dispute which dispute prevents the implementation of the

 

agreement of sale.  This dispute falls within the authority of the duly appointed

 

arbitrator being Mr Charles Lazarus of Lazarus and Sarif.

 

            I therefore find that applicant’s interpretation of the meaning of the arbitration

 

clause is unduly restrictive being not a true reflection of the intention of the parties.

 

 

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            I am accordingly satisfied that the point raised in limine is valid and there is

 

therefore no need for me to consider the merits of the applicant’s application.  The

 

application is therefore dismissed with costs.

 

 

 

 

Messrs Coghlan & Welshapplicant’s legal practitioners

Messrs Lazarus & Sarifrespondents’ legal practitioners