Paramount Exports (Private) Limited v Alliance Insurance Company Private Limited

Paramount Exports (Private) Limited, a garment manufacturer, held an insurance policy with Alliance Insurance Company covering buildings, plant and equipment, stock, and business interruption. On 4 December 2023, a fire destroyed a building at the applicant's premises at 14 Plymouth Road, Southerton, Harare, causing substantial damage. On 25 January 2024, the respondent acknowledged liability and elected to reconstruct the destroyed building. The respondent invited tenders and approved a bid of USD 4,684,715.07 from Heritage Construction, with reconstruction scheduled to commence on 1 September 2024. However, the applicant raised concerns about foundation cracks and incomplete architectural drawings. On 11 October 2024, the City Council directed that new architectural and structural drawings be submitted. On 13 November 2024, the respondent offered USD 3,898,000 in lieu of reconstruction, claiming it could pay monetary compensation instead. The applicant rejected this offer as inadequate, estimating the actual reconstruction cost at USD 15,000,000 (within the insured value of USD 24,435,000). The applicant sought an order compelling the respondent to reconstruct the building as originally elected.

• Whether the respondent complied with its contractual obligations regarding reconstruction, taking into account concerns about foundation cracks and incomplete drawings
• Whether the applicant is entitled to an order compelling the respondent to carry out reconstruction in accordance with its election under the policy
• Whether material disputes of fact precluded determination on motion proceedings
• Whether specific performance is available as a remedy in insurance contracts
• Whether the dispute was subject to arbitration under the policy
• Whether new evidence was improperly introduced in the answering affidavit

1. The respondent is ordered to reconstruct the applicant's property at Stand 3991 Salisbury Township, also known as Number 14 Plymouth Road, Southerton, Harare, within six months of the date of this order. 2. The respondent must comply with all regulatory requirements stipulated by the Council of the City of Harare. 3. The respondent shall bear the costs of suit.

Under Roman-Dutch law as applied in Zimbabwe, specific performance is the primary remedy for breach of contract, and insurance contracts are not excluded from this principle. Once an insurer elects to reinstate or reconstruct insured property under a policy that gives it such an option, the insurer becomes contractually bound by that election and cannot unilaterally change its mind or substitute monetary compensation, even if the cost of reinstatement exceeds initial estimates or the policy limit. A party to a binding contract who is ready, willing and able to perform their own obligations has a prima facie right to demand actual performance by the other party, provided performance is possible and just. The insurer's obligation to reinstate includes ensuring that reconstruction is carried out properly and safely, and reasonable concerns raised by the insured regarding structural integrity or regulatory compliance do not absolve the insurer of its obligation to perform.

The court noted that academic statements suggesting that an insurer's reinstatement contract may not be 'compellable' describe English judicial reluctance in the 19th/20th centuries to supervise rebuilding contracts, not a universal rule of contract law, and cannot displace the Roman-Dutch position that performance of contractual obligations is enforceable. The court observed that even if some jurisdictions treat insurance reinstatement as resulting in damages, this does not mean the insurer's obligation ceases to exist or cannot be enforced. The court commented that allowing the respondent's argument on arbitration to prevail would be tantamount to permitting a party to extend arbitration beyond its agreed limits, undermining the clarity and enforceability of arbitration clauses. The court emphasized that the nature of a dispute about enforcing a specific contractual obligation and ensuring that insured property is restored as elected is inherently judicial rather than arbitral.

This case is significant in Zimbabwean insurance and contract law as it affirms that specific performance is the primary remedy under Roman-Dutch law principles and applies to insurance contracts. It establishes that once an insurer elects to reinstate damaged property, that election is binding and the insurer cannot unilaterally substitute monetary compensation, even if the cost of reinstatement exceeds the initial estimate. The judgment clarifies that an insured party who has fulfilled their obligations under the policy is entitled to demand actual performance of the insurer's contractual undertaking. The case also provides guidance on the scope of arbitration clauses in insurance policies, distinguishing between valuation disputes (arbitrable) and disputes about the nature of contractual obligations (judicial). It reinforces the principle that where a party to a binding contract is ready, willing and able to perform their obligations, they have a prima facie right to demand performance from the other party.