OK Zimbabwe Limited v Admbare Properties (Pvt) Limited and Daniel Tivadar N.O.

The first respondent (Admbare Properties) leased commercial premises at Stand 1561 of Ardbennie, Harare to the applicant (OK Zimbabwe) under a lease agreement dated 30 December 2013 with commencement from 1 November 2010. The rental clause provided for payment of either a base rent of US$2,000 per month or 1.5% of turnover (net sales after VAT deduction) per month, whichever was greater. The lease permitted use of the premises for retail business and all business reasonably or necessarily incidental thereto. The applicant began manufacturing pies on the premises for both on-site sales and distribution to its other branches. A dispute arose as to whether the proceeds from pies distributed to the applicant's branches should be included in calculating 'turnover rent'. The matter was referred to arbitration. The arbitrator (second respondent) rendered an award on 2 March 2015 finding the applicant liable to pay turnover rent on pies produced at the premises but sold at other branches, and ordered payment of US$76,481.00. The applicant filed HC 2939/15 seeking to set aside the award on grounds it violated public policy. The first respondent filed HC 3035/15 seeking registration of the award as a court order. Both applications were consolidated by consent.

• Whether the arbitral award should be set aside on grounds that it violates public policy of Zimbabwe in terms of Article 34 of the Arbitration Act
• Whether the arbitrator correctly interpreted clauses 3.1 and 7 of the lease agreement regarding turnover rent and permitted use of premises
• Whether the arbitrator improperly rewrote the contract between the parties
• Whether the piecemeal approach to the arbitration (rendering the award in two stages) was improper and contrary to public policy
• Whether the arbitral award should be registered as an order of court

1. The application HC 2939/15 to set aside the arbitral award granted on 2 March 2015 is dismissed. 2. The application HC 3035/15 for registration of the arbitral award is granted and the award is registered as an order of court. 3. The applicant in HC 2939/15 shall pay costs in respect of both consolidated cases HC 2939/15 and HC 3035/15.

1. An arbitral award may only be set aside on the limited grounds specified in Article 34 of the Arbitration Act, and courts do not exercise appellate powers over arbitral awards. 2. For an award to be set aside on public policy grounds under Article 34(2)(b)(ii), it must constitute a palpable inequity that is so far-reaching and outrageous in its defiance of logic or acceptable 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 (applying ZESA v Maphosa test). 3. In interpreting commercial lease agreements, business activities that are 'reasonably or necessarily incidental' to the permitted use fall within the scope of the lease. 4. Where rent is calculated on a turnover basis, all sales for the benefit of the lessee conducted using the leased premises, including goods manufactured on the premises for distribution and sale through the lessee's other outlets, form part of the turnover for rental calculation purposes. 5. The conduct of arbitration proceedings in stages (bifurcating liability and quantum) does not violate public policy where it is necessary for proper determination of the dispute and both parties cooperate.

The court observed that the limited grounds for setting aside arbitral awards under Article 34 are designed to give value and protection to the institution of arbitration, recognizing that this route of dispute resolution is cheaper, faster and less cumbersome than the formal court system. The court noted that for arbitration to be effective, parties' agreements that arbitral decisions shall be 'final and binding' must carry that meaning, and finality in dispute resolution must be emphasized. The court commented that a different finding by the arbitrator would have meant the applicant was unlawfully subletting the premises to its branches for pie manufacturing, which was clearly not the case. The court also noted that the agreed basis of 'turnover rent' would fall away if the premises were to be used merely as a warehouse for the applicant's branches. On costs, the court observed that despite consolidation of the two applications, it was fair for the applicant to pay costs on both applications as there was never any merit in seeking to set aside the award or opposing its registration.

This case is significant in Zimbabwean arbitration law as it reinforces the limited scope for judicial intervention in arbitral awards under Article 34 of the Arbitration Act. It emphasizes that courts will not exercise appellate powers over arbitral awards and will only set aside awards on public policy grounds where there is palpable inequity that constitutes an outrageous defiance of logic or acceptable moral standards. The judgment upholds the finality and binding nature of arbitral awards, protecting the integrity of arbitration as an alternative dispute resolution mechanism. It also provides guidance on the interpretation of commercial lease agreements, particularly regarding turnover rent clauses and the scope of permitted business activities on leased premises. The case confirms that arbitrators have discretion to conduct proceedings in stages where necessary for proper determination of liability and quantum.