NAME OF CASE
Golden Drive Inv(Pvt)Ltd v Tel One (Pvt)Ltd and another
NAME OF THE COURT
Supreme Court of Zimbabwe
CITY AND COUNTRY
Appeal,illegality of agreements,
SUMMARY OF CASE
The appellant is a private company registered in accordance with the laws of Zimbabwe. It carries on the business of tobacco contract farming, merchandising and export. The first respondent is a company incorporated in accordance with the laws of Zimbabwe. It carries on the business of providing telecommunication services in the country. In 2004, the first respondent entered into an agreement with Huawei Technology Investments (Pvt) Ltd (“Huawei”), a company registered in the Republic of China, for the manufacture and supply of telecommunication equipment. The terms of the contract were that Huawei would manufacture and provide the first respondent with communication equipment. The first respondent had local currency but needed foreign currency for the purposes of discharging its obligation to Huawei. It entered into two agreements with the appellant, the purposes of which were to raise foreign currency from the sale of tobacco to pay Huawei. In terms of the first agreement which related to the 2005/6 tobacco growing season, the first respondent was to provide local currency to enable the appellant to buy tobacco from local growers on its behalf. The appellant’s obligation was to sell the tobacco in foreign currency on behalf of the first respondent. The money was to be transmitted to Huawei to discharge the first respondent’s debt. The second agreement relating to the 2006/7 tobacco growing season had similar terms. In respect to 2005/6 the first respondent discharged its obligation in terms of the contract. The appellant bought and sold the tobacco in foreign currency. It then paid the first respondent the sum of US$4 617 167.82. That amount was not enough to discharge the first respondent’s indebtedness to Huawei. No money was paid to the first respondent from the sales of tobacco bought and sold during the 2006/7 growing season. In 2010 the first respondent made a claim against the appellant for payment of foreign currency owed in terms of the two agreements. The appellant partially admitted the claim but denied that it owed all that the first respondent was claiming. The parties agreed to have the dispute settled by way of arbitration under the auspices of the Arbitration Centre.
The issues for determination are whether the court a quo misdirected itself in failing, to uphold the contention that the arbitrator ought to have determined the merits of the question of the illegality of the two agreements entered into by the parties as advanced by the appellant in the heads of argument after the hearing of evidence had ended. The contention is that as the question of the illegality of the contracts was a question of law which went to the root of the dispute between the parties, the arbitrator was obliged to depart from the requirements of Article 23(2) of the Model Law. The second issue is whether the court a quo misdirected itself in failing to uphold the contention that the arbitrator exceeded the terms of submission to arbitration when he granted the award.
- The illegality of the contracts would have been part of the defence raised by the appellant against the first respondent’s claims. Raising it at this belated stage of the proceedings and in the manner the appellant did would, if accepted, mean that the arbitrator allowed an amendment to the defence in a manner contrary to the procedure provided for the purpose by Article 23(2) of the Model law. Article 23(2) envisages a situation in which an arbitrator makes a decision to allow or refuse a proposed amendment following submissions by both parties. It was not common cause that the contracts were illegal. The first respondent would have been entitled to resist the proposed amendment of the defence on the basis that the agreements were lawful.
- The court held that the arbitrator had acted within his jurisdiction in coming up with the award. He determined the issues as borne out of the evidence which had been disclosed as a result of cross examination.