On the night of 5th/6th July 2015, thieves broke into the applicant's shop at Gazaland Shopping Centre in Highfield, Harare, and stole goods and money totaling $64,272. At the time, Nhamoinesu Shoniwa, a guard employed by the first respondent (Safeguard Security Services), was on duty pursuant to a security services contract dated 6 March 2013. The applicant had insured only a portion of its property and recovered only $7,245 from its insurance company. The applicant sought to recover the difference ($57,027) from the first respondent. The first respondent denied liability, relying on limitation of liability clauses. The matter was referred to arbitration in terms of clause 4.4 of the contract. The second respondent (arbitrator) found the first respondent liable for willful acts or gross negligence but concluded that the first respondent was not liable because the applicant had failed to insure all its property as required by clause 3.1 of the contract. The applicant applied to set aside the arbitral award on the basis that it was contrary to public policy under Article 34(2)(b)(ii) of the UNCITRAL Model Law.
The arbitral award was set aside. Paragraph 2 of the applicant's draft order (which sought to have the matter resolved by a different arbitrator) was struck out. The application was otherwise granted as prayed, leaving it to the parties to decide how to proceed with the resolution of their dispute.
An arbitral award will be set aside as contrary to public policy under Article 34(2)(b)(ii) of the UNCITRAL Model Law where the arbitrator's conclusion is logically inconsistent with his findings and defies reason. Where an arbitrator finds a party liable for willful or grossly negligent conduct, that party cannot escape liability merely because the claimant failed to fully insure its property as required by contract. The principle of subrogation in insurance law operates such that an insurer who compensates an insured is entitled to step into the insured's shoes and recover from the wrongdoer; alternatively, the insured may recover from the wrongdoer and pass the recovery to the insurer. A contractual clause requiring a party to claim first from its own insurer does not absolve a liable wrongdoer from liability for the uninsured portion of the loss. The loss should lie where it falls—with the party whose willful or grossly negligent conduct caused it.
The court commented that the applicant's breach of contract in failing to insure all its goods as required by clause 3.1 was a separate matter between the parties and did not allow the first respondent to avoid the liability found against it. The court also made observations about the nature of public policy, stating that it should encourage judicial officers to adhere to the letter and spirit of the law and that decisions should be consonant with logic and good reason. Mangota J observed that anything short of this can be described as offensive to public policy and devoid of reason or logic. The court noted that public policy, as defined, carries elements of justice delivery and aims to resolve disputes efficiently and effectively while serving the ends of justice.
This case is significant in Zimbabwean law for clarifying the grounds for setting aside arbitral awards on public policy grounds under Article 34(2)(b)(ii) of the UNCITRAL Model Law. It establishes that an arbitral award will be set aside where the arbitrator's reasoning is logically inconsistent or contradictory, particularly where liability is found but then negated on grounds that do not logically absolve the liable party. The case also reinforces the application of the principle of subrogation in insurance law within the context of contractual disputes, holding that an insured party's failure to fully insure does not absolve a wrongdoer from liability once that liability has been established. The judgment provides guidance on what constitutes a decision offensive to public policy—one that is unconscionable, outrageous, and defies logic or accepted moral standards. It also reaffirms the principle from ZESA v Maposa that courts should not usurp parties' rights by remitting disputes to arbitration, but should leave parties to choose how to proceed after an award is set aside.