On 1 November 2010, the plaintiff (Takura Ventures) entered into an agreement to sell 4,250 ordinary 'A' Class shares in Karina (Pvt) Ltd to the first defendant (Lakavert Investments) for US$748,000. The agreement contained a condition precedent (clause 3.1) requiring the first defendant to secure an irrevocable letter of credit/guarantee from the second defendant (Interfin Banking Corporation) by 31 December 2010 for US$798,000 (including accrued interest). The purchase price and interest were due on or before 30 April 2011. The second defendant provided the guarantee on 31 December 2010, binding itself as surety and co-principal debtor. Neither defendant paid by the due date. On 16 May 2011, the second defendant proposed to settle within 90 days, but no payment was made. The plaintiff issued summons on 26 July 2011 claiming payment jointly and severally from both defendants. The first defendant filed a plea on 23 September 2011 and subsequently raised a special plea on 21 October 2011, arguing that the court lacked jurisdiction because the agreement contained an arbitration clause (clause 14) requiring disputes to be referred to arbitration. The second defendant was placed under curatorship on 11 June 2012 and proceedings against it were stayed.
The first defendant's special plea was dismissed with costs.
For a special plea based on an arbitration clause to succeed, the excipient must establish: (1) the existence of a valid arbitration clause; (2) the existence of a genuine dispute between the parties; and (3) that the arbitration clause is applicable to that dispute. A dispute between parties can only arise ex facie the pleadings filed with the court and cannot be assumed from mere appearance to defend or raised only in heads of argument. The court has jurisdiction to determine whether a genuine arbitrable dispute exists before referring matters to arbitration. Where the facts establishing breach of contract are clear, admitted, and undisputed (such as failure to pay by a specified due date), there is no genuine dispute capable of being referred to arbitration, and the arbitration clause does not oust the court's jurisdiction. Furthermore, under Article 8 of the Arbitration Act, a party seeking to invoke an arbitration clause must request referral to arbitration no later than when submitting their first statement on the substance of the dispute.
The court observed that while the provisions of the Rules of Court are not strictly peremptory, they are designed to regulate practice and procedure, and strong grounds must generally be advanced to persuade the court to act outside them. However, the court indicated willingness to exercise discretion under Rule 4C(a) to condone minor breaches (such as a one-day delay in setting down a special plea) where: (1) both parties consent or request condonation; (2) the matter has been fully argued and ventilated; (3) refusing condonation would waste court time and resources by requiring the matter to be deferred to trial; and (4) the irregularity was discovered only during judgment preparation after full argument. The court cautioned that its reasoning should not be regarded as setting a precedent for cases requiring strong grounds for departure from the rules. The court also noted that the second defendant's attempted post-breach assumption of the entire debt appeared to fall outside the terms of the original agreement between plaintiff and first defendant, as the agreement was for a guarantee of payment by a specific date, not for subsequent debt assumption arrangements.
This case contributes to Zimbabwean jurisprudence on arbitration clauses and civil procedure in several important ways: (1) It reinforces that mere existence of an arbitration clause does not automatically oust court jurisdiction—there must be a genuine, arbitrable dispute; (2) It clarifies that a dispute must arise ex facie the pleadings and cannot be assumed from mere appearance to defend; (3) It confirms that courts have the power to determine whether a genuine dispute exists before referring matters to arbitration; (4) It demonstrates judicial discretion in condoning minor procedural irregularities under Rule 4C(a) where strong grounds exist, particularly concerning efficient use of court resources; (5) It illustrates that where breach of contract is clear and admitted (non-payment by due date), there is no factual dispute to arbitrate, and the court retains jurisdiction to adjudicate the claim.