CHIWESHE
JA: This
is an appeal against the whole judgment of the High Court (the court
a quo)
sitting at Harare, dated 30 November 2021, setting aside para 84A of
the arbitral award given under the hands of arbitrators retired
Justice A.M. Ibrahim, retired Justice M. H. Chinhengo and
Advocate F. Girach on 1 March 2021.
Under
para 84A of the award the arbitrators declared that the agreement of
procurement entered into between the parties did not have the prior
approval of the Procurement Regulation Authority of Zimbabwe (PRAZ)
as required by section 15(1) and (2) of the Public Procurement and
Disposal of Public Assets Act [Chapter 22:23]
(the Act).
It
is that declaration that was reviewed and set aside by the court
a quo.
Aggrieved
by the decision of the court a
quo,
the appellant has noted the present appeal.
THE
PARTIES
The
appellant is a company incorporated in terms of the laws of Zimbabwe.
The Government of Zimbabwe is its major shareholder. Its objects
and functions are defined in section 4 of the Government Medical
Store (Commercialisation) Act No.13/2000 and they include the
purchase and sale, dealing in and storing medicines, medical
equipment and other goods and articles for use in hospitals, clinics,
pharmacies and other medical establishments.
The
respondent is a foreign company established in terms of the laws of
Switzerland.
FACTUAL
BACKGROUND
On
11 December, 2019 the parties entered into an agreement in terms of
which the respondent was to supply to the appellant certain medicines
and medical sundries under Tender number NAT DP 19/2019.
The
respondent delivered medical supplies worth US$2,733,480 to the
appellant. Of the above figure the appellant refused to take delivery
of some medicines to the value of US$210,000.00, arguing that the
contract was concluded in contravention of section 15(1) and (2) of
the Act which provision reads as follows:
“15(1)
A procurement entity shall not initiate or conduct any procurement
requirement proceedings in which the value of the procurement
requirement is at or above the prescribed threshold, unless such
procurement entity has been generally authorized by the Authority to
conduct such proceedings.
(2)
Authorization in terms of subsection (1) shall be given in writing.”
It
was for that reason that the appellant refused to pay for the
medicines and medical sundries supplied to it by the respondent even
though it had taken delivery of the bulk of the medicines and
proceeded to consume same.
The
appellant formally cancelled the above quoted tender for the supply
of medicines and sundries. It did so on 9 June 2020.
The
respondent's view was that the cancellation was unlawful.
The
arbitrators found that the contract was illegal on the grounds that
it was concluded without the authority required in terms of the Act.
Displeased
with that finding the respondent approached the court a
quo
with an application for the setting aside of that arbitral award. It
did so under Article 34 of the first schedule to the Arbitration Act.
The
court a
quo
granted the application and proceeded to set aside the arbitral award
for being in conflict with the public policy of Zimbabwe. It is that
decision that is the subject of this appeal.
GROUNDS
OF APPEAL
The
appellant relies on four grounds of appeal as follows:
“1.
The High Court grossly erred in finding that paragraph 84A of the
award issued by Justice A. M. Ebrahim (Rtd), Justice M.H. Chinhengo
(Rtd) and Advocate Firoz Girach dated 1 March 2021 was contrary
to the public policy of Zimbabwe and proceeding to set it aside when
no authority to enter into the contracts in issue had been given by
the Procurement Regulatory Authority of Zimbabwe in accordance with
section 15(1) and (2) of the Public Procurement and Disposal of
Public Assets Act [Chapter
22:23].
2.
The High Court further erred in considering the approval of the
contract by the Special Procurement Oversight Committee in terms of
section 54 of the Act to have been sufficient for purposes of section
15 of the Act when it was clear that the two legal provisions served
different purposes.
3.
The High Court further grossly misdirected itself in taking into
account irrelevant factors in interpreting the letter of 6 November
2019 and concluding that the said letter had been issued by the
Procurement Regulatory Authority of Zimbabwe in accordance with
section 15 of the Act.
4.
The High Court further erred in relating to an interpretation of the
letter of 6th
November 2019 taking into account factors which had neither been
pleaded, nor argued by the parties and proceeding to make a finding
against the appellant on the basis of such factors.”
RELIEF
SOUGHT
The
appellant seeks the following relief:
“The
present appeal be allowed with costs and the judgment of the High
Court be set aside and substituted with the following:
(1)
The application in case number HC2713/21 be and is hereby dismissed.
(2)
The applicant shall pay the costs of suit.”
ISSUES
The
grounds of appeal only raise one issue, namely, whether or not the
contract of procurement was approved by PRAZ in terms of section
15(1) of the Act.
Surprisingly,
the grounds of appeal do not challenge the substantive finding of the
court a
quo,
namely that the arbitral award was contrary to the public policy of
Zimbabwe.
ANALYSIS
After
considering case law as to how the High Court should exercise its
powers under Article 34 or 36,
of
the Arbitration Act the court a
quo
correctly came to the following conclusion:
“From
the above decision, the settled position of the law is that an
arbitral award ought to be set aside if its enforcement would offend
the public policy of Zimbabwe.”
See
Zimbabwe
Electricity Supply Authority v Maposa
1999 (2) ZLR 452 (S).
The
court a
quo
also correctly stated the law in so far as the converse position is
acceptable, that is, an arbitral award should not be set aside unless
the arbitrator's reasoning or conclusion is so flawed as to violate
some fundamental principle of law or morality or justice.
See
Delta
Corporation (Pvt) Ltd v Origen Corporation (Pvt) Ltd
2007 (2) ZLR 81 (S).
The
court a
quo
further observed that an award may be set aside as being contrary to
the public policy of Zimbabwe if it is so outrageous in its defiance
of logic or recognized 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. See the Zimbabwe
Electricity Supply Authority
case
supra.
It
is also trite that the mere faultiness or incorrectness of an
arbitral award cannot, on its own, be the basis upon which an award
may be set aside. The award must, in addition, offend the public
policy of Zimbabwe.
PUBLIC
POLICY
It
is necessary to define public policy in the context of the present
case.
The
public policy of Zimbabwe in cases of this nature is defined by
section 15(1) and (2) of the Act, namely that a State procurement
authority shall not entertain the procurement of goods or services
whose value is equal to or exceeds the prescribed threshold without
the prior approval of the regulatory authority PRAZ.
Thus
section 15(1) and (2) constitute both the law and the public policy
of Zimbabwe in cases of this nature.
If
for example procurement is made without the requisite authority such
procurement would be deemed contrary to the law and the public policy
of Zimbabwe. Conversely, if the procurement entity obtains PRAZ
approval and enters into a legally binding contract, it would be
contrary to the law and the public policy of Zimbabwe to declare such
contract illegal and proceed to set it aside.
DECISION
OF THE COURT A
QUO
The
court a
quo
found
in favour of the respondent on the basis of a letter dated 6 November
2019 written by the Chief Executive Officer of PRAZ addressed to the
Managing Director of the appellant.
The
appellant argued that the letter does not constitute authority given
in terms of section 15(1) and (2) of the Act.
It
argued that the letter was written on behalf of Special Procurement
Oversight Committee (SPOC), a subcommittee of PRAZ, which cannot
exercise the powers of PRAZ.
The
respondent argued to the contrary, insisting that the letter
originates from PRAZ itself.
The
relevant part of the letter reads as follows:
“Your
minute dated 29 October 2019 refers.
At
the Special Procurement Oversight Committee (SPOC) round robin
meeting held on 6 November 2019:
Members
observed the following:
(i)
The direct procurement method has been done to address the urgent
need of the requirements in view of the current crisis at medical
institutions country wide.
(ii)
The current requirements are a stop gap measure to address the
current crisis.
(iii)
On the medicines, the accounting officer is proposing to award all 85
costs
except for 32 imipramine 25mg tablets that has been recommended for
cancellation since the drug is no longer being used in public health
institutions.
(iv)
On medical sundries, the accounting officer proposed to award 15
items out of the 18 items as follows:
…………………...
……………………
Therefore,
the accounting officer's recommendations are consistent with the
provisions of the PPDPA Act.
Accordingly,
SPOC resolution 0519 of the same date, having reviewed the Accounting
Officer's submission in terms of section 54(10) of the Public
Procurement and Disposal of Public Assets (PPDPA) Act, resolved on
the founder as follows:
To
award Tender NAT DP 19/20 for the supply and delivery of registered
medicines and surgical sundries to Natpharm regional stores to Drax
Consult SAGL.
………………………
………………………
You
are therefore advised to proceed as follows:
1.
Take all necessary steps as directed by the resolution.
2.
In all communication, please quote the above SPOC resolution number
and the date.
N.
Chizu
Chief
Executive Officer
PROCUREMENT
REGULATORY AUTHORITY OF ZIMBABWE”
This
letter was the subject of intense scrutiny by the court a
quo.
It
noted in particular what it referred to as “four crucial points”
in need of attention.
Firstly,
it was observed that the letter was written on the PRAZ letter head.
Effectively, reasoned the court a
quo,
that meant that PRAZ “had unequivocally assumed ownership of the
letter.” Secondly, the court a
quo
observed that the letter had been written and signed by the Chief
Executive Officer of PRAZ, which makes it clear that the letter had
been written on behalf of PRAZ itself and SPOC, its subcommittee.
Thirdly,
it was noted that the letter gave Natpharm (the appellant) authority
to procure medicines and surgical sundries from Drax Consult Sagl
(the respondent).
Fourthly,
in the letter, the Chief Executive Officer advised the respondent to
“take all necessary steps as directed by the resolution” and to
quote the above SPOC resolution number and the date”.
Based
on these observations the court a
quo
came to one conclusion – that the letter emanated from PRAZ not
SPOC and that the letter whose wording is clear and unambiguous,
constitutes the PRAZ authority required under section 15(1) and (2)
of the Act.
That
finding of fact on the part of the court a
quo
cannot be faulted. It is based on the evidence placed before it.
This
court will not interfere with the finding of fact made by the court a
quo
save under the parameters described in Reserve
Bank of Zimbabwe v Granger and Anor
SC34/01
where this Court held:
“An
appeal to this Court is based on the record. If it is to be related
to the facts there must be an allegation that there has been a
misdirection on the facts which is so unreasonable that no sensible
person who applied his mind to the facts would have arrived at such a
decision. And misdirection of facts is either a failure to appreciate
a fact at all, or a finding of fact that is contrary to the evidence
actually presented. See Hama
v National Railways of Zimbabwe
1996 (1) ZLR 664 (S) at p670 and S
v Pillay
1977 (4) SA 531 (AD) at p353C-E.”
In
casu,
the appellant argues that the letter of 6 November 2019 originated
from SPOC and could not have been the authority required under
section 15 of the Act.
This
view is not supported by the evidence.
As
correctly observed by the court a
quo,
the letter originated from PRAZ. The fact that the letter makes
reference to SPOC resolutions does not alter the fact that it was the
Chief Executive Officer of PRAZ who wrote on behalf of that
authority.
There
was no misdirection on the part of the court a
quo,
certainly not of the magnitude referred to in the National
Railways case supra,
warranting interference on the part of this Court.
We
note in passing, that it is inconceivable that a procurement
authority of the stature of the appellant could have engaged in
procurements of this magnitude without the approval of PRAZ. Surely,
they must have relied on the letter from PRAZ of 6 November 2019
which letter was addressed to their managing director, with detailed
instructions as to how the appellant should proceed.
One
wonders why the appellant now seeks to resile from that arrangement!
The
fact that the arbitrators erred when they found that the contract
between the parties was illegal and unenforceable for want of
compliance with section 15(1) and (2) of the Act is now established.
The
question that needs to be addressed is whether the award is contrary
to the public policy of Zimbabwe and therefore liable to be set aside
in terms of section 34 of the First Schedule to the Arbitration
Act [Chapter
7:15].
The
respondent argues that the award offends the public policy of
Zimbabwe in that it declared as illegal and unenforceable a contract
authorized by the relevant body.
The
court a
quo
took the view that the award offends public policy in that it is so
outrageous in its defiance of logic or accepted moral standards that
a sensible and fair-minded person's conception of justice in
Zimbabwe would be intolerably hurt by the award. It asserts that “it
is illogical for any fair-minded person to conclude that a contract
which has been sanctioned in terms of the law by the body empowered
to give its blessing is unlawful.”
The
court a
quo
noted that public policy dictates that a contract done within the
terms of the law should be respected. For that proposition it relied
on the decision in Delta
Corporation (Pvt) Ltd v Origen (supra).
The
court a
quo
noted that the letter of 6 November 2019 was one of the papers placed
before the Arbitrators and would have been one of the documents to be
considered before issuing the award. If it was not considered, then
the Arbitrators did not take into account relevant information before
them.
In
that respect the court a
quo
was of the view that the Arbitrators failed to apply their minds to
the import of the letter hence wrongly arrived at the decision that
the contract was illegal for non-compliance with section 15(1) and
(2) of the Act.
Where
the Arbitrator has not applied himself to the question or has totally
misunderstood the issue, and the resultant injustice reaches
intolerable prejudice, then the Arbitral award must be set aside.
The
court a
quo
concluded, correctly in our view, that the award would have been made
against the evidence.
In
casu,
the respondent stood to lose substantial sums of money under
circumstances where the appellant had refused to pay for the
medicines it received, and consumed, under the guise of
non-compliance with section 15(1) and (2) of the Act. The court a
quo
found that the injustice arising from a finding of illegality reached
the point of offending the public policy of Zimbabwe. We therefore
find no fault with the court a quo's findings of fact and law.
DISPOSITION
The
court a
quo's
reasoning cannot be faulted. It must be upheld. The appeal has no
merit. Costs shall follow the cause.
Accordingly,
it is ordered as follows:
1.
The appeal be and is hereby dismissed.
2.
The appellant shall pay the costs of suit.
BHUNU
JA: I
agree
MUSAKWA
JA: I
agree
Costa
& Madzonga, appellant's legal practitioners
Samukange
Hungwe Attorneys, respondent's legal practitioners
