Portnet Holdings (Pvt) Ltd v Muchaneta Maliseni

The respondent was an employee of the applicant. On 30 January 2009, the parties concluded a mutual agreement to terminate the respondent's employment contract. The respondent was awarded terminal benefits of a Dell laptop, a Mitsubishi Lancer motor vehicle, and US$16,000. The applicant paid US$6,600 in two batches, leaving a balance of US$9,400 outstanding. The respondent referred the dispute for conciliation on 28 February 2011. Following a stalemate, the matter proceeded to compulsory arbitration. On 25 August 2011, the arbitrator gave a default award ordering the applicant to pay the balance of US$9,400. On 6 September 2011, the applicant filed an application to set aside the arbitral award on two grounds: (1) improper notice of the arbitrator's appointment and arbitral proceedings, and (2) that the award was contrary to public policy because the agreement to pay terminal benefits in foreign currency was illegal under Exchange Control Regulations prior to Zimbabwe's adoption of the multicurrency regime in February 2009.

• Whether the applicant was given proper notice of the appointment of the arbitrator and the arbitral proceedings in terms of Article 34(2)(a)(ii) of the Arbitration Act
• Whether the arbitral award was contrary to the public policy of Zimbabwe in terms of Article 34(2)(b)(ii) of the Arbitration Act
• Whether the agreement to pay terminal benefits in foreign currency violated the Exchange Control Regulations SI 109/96
• Whether the in pari delicto rule should be applied to prevent enforcement of an allegedly illegal agreement
• Whether the High Court had jurisdiction to entertain the application

The application to set aside the arbitral award was dismissed with costs.

An arbitral award will not be set aside on public policy grounds merely because the underlying agreement violated statutory provisions, where setting aside the award would result in unjust enrichment of the party seeking to rely on the illegality. The in pari delicto rule may be relaxed on grounds of justice and equity to prevent one party from benefiting from illegality at the expense of another, particularly where both parties were involved in the illegal conduct but one party was more culpable. Notice of arbitral proceedings is deemed properly given under Article 3(1)(a) of the Arbitration Act when delivered to the party's place of business, even if the party claims to have designated its legal practitioners' address for service, in the absence of proof of such agreement. The public policy defense to arbitral awards must be construed restrictively to preserve finality in arbitrations, and is only applicable where fundamental principles of law, morality, or justice are violated.

The court observed that there is a distinction between the procedure for having an arbitral award set aside (Article 34) and grounds for refusing to recognize or enforce an arbitral award (Article 36), even though the substantive grounds may be identical. The court noted that the concept of public policy is not immutable but must conform to changing times and suit existing circumstances. The court also observed that the Zimbabwe dollar currency had been rendered moribund and could not transact, making it impossible to pay the terminal benefits in that currency. The court commented that the most ideal mode of proving service is a return of service as used with court process, but acknowledged that such stringent methods are not required for arbitral proceedings under the relevant statutes.

This Zimbabwean High Court case is significant for its treatment of arbitration law principles and public policy defenses to arbitral awards. It demonstrates the restrictive approach courts should adopt when considering public policy challenges to arbitral awards, emphasizing the importance of finality in arbitration. The case also illustrates the application of the in pari delicto rule in employment contexts and the circumstances in which courts will relax this rule to prevent unjust enrichment. The judgment shows how courts balance competing public policy considerations - enforcing exchange control regulations versus preventing unjust enrichment and ensuring employees receive lawful entitlements. While this is a Zimbabwean case, its principles regarding arbitration, public policy defenses, and unjust enrichment have persuasive value in South African jurisprudence given the similar legal traditions and the court's reliance on South African authority (Jajbhay v Cassim).