DURCO (PVT) LTD v DAJEN (PVT) LTD 1997 (2) ZLR 199 (H)

Flynote

Arbitration — award — effect — whether award final or whether rights under that award can be waived and matter can be submitted to fresh arbitration proceedings — whether it would be contrary to public policy to enforce second arbitration award

Headnote

The applicant wished to sell maize on the Zimbabwe Commodity Exchange (Zimace) and the respondent wished to buy maize. The applicant's broker concluded a contract with the respondent's broker, in terms of which the applicant was to sell maize to the respondent. However, the respondent refused to take delivery of the maize, claiming that its broker had not been authorised by it to conclude this contract. Because of the respondent's refusal to take delivery of the maize, the applicant was obliged to dispose of the maize to a third party at a loss. As a result there was a dispute between the applicant and the respondent as to whether the respondent's broker actually had the authority to conclude the contract, and if it did, whether the respondent was liable for the loss suffered by the applicant. By agreement between the applicant and the respondent, the matter was referred to arbitration. The outcome of the arbitration was that the respondent was found not liable because it was found that the respondent's broker did not have authority to conclude the contract on behalf of the respondent.

Subsequently, a representative of Zimace discussed with an arbitrator the implications of possible further arbitration proceedings between the applicant and the respondent's broker. If it was found at this second arbitration that respondent's broker was authorised to act on behalf of the respondent, the applicant would then be left without a remedy as it would have no recourse against the respondent's broker, because he would have been found to have acted with authority and he would have no recourse against the respondent who was not a party to the second arbitration. To avoid this possible end result, it was decided that a second arbitration should be held involving the applicant, the respondent and the respondent's broker. The three parties agreed to submit to this second arbitration. At the second arbitration, the arbitrators found by a majority that that the respondent's broker did have authority to act for the respondent and that the respondent was thus liable to the applicant. When the applicant then demanded payment from the respondent, the latter refused to pay. The applicant applied to court for the enforcement of the second arbitration award. The respondent opposed the application on two grounds, namely that the second award was not valid and enforceable and, even if it was valid, it would be contrary to public policy to enforce it.

Held, that the enforcement of the second award would not be contrary to public policy. In terms of the Arbitration Act 6 of 1996, a court may refuse to enforce an arbitration award if it would be contrary to public policy to do so because it was induced by fraud or corruption or if the proceedings breached the rules of natural justice. In the present case, there had been no fraud or corruption. The representative of the respondent had submitted to the second arbitration on behalf of the respondent, knowing the implications for the respondent of what he was doing, the implications having been carefully explained to him. There had been no breach of the principles of natural justice. There was no allegation of bias on the part of the arbitrators and the respondent had been legally represented at the second arbitration. Although the respondent's legal representatives objected to the second arbitration on the ground that the matter has been conclusively settled by the first arbitration, the legal representatives then fully participated in the proceedings.

Held, further, that although an arbitral award is final and binding between the parties to the arbitration and although it is in the interests of public policy that there should be finality in a case where a matter has been submitted to arbitration, one of the parties who had acquired rights as a result of the award was free to surrender or waive those rights. In the present case, the respondent, with full knowledge of his rights, had abandoned his rights by signing the submission of the matter to the second arbitration. This had had the effect of extinguishing the rights acquired as a result of the first award. The respondent was not entitled after the second arbitration unilaterally to withdraw its waiver.

Held, therefore, that the application to have the second arbitration award enforced must succeed.