Regal Insurance Company (Private) Ltd v Zimbabwe Posts (Private) Limited

On 28 April 2016, the applicant and respondent entered into a commercial agreement for the applicant to pay the respondent commission in respect of insurance sales at rented counters. The agreement contained an arbitration clause (Clause 15) for dispute resolution. In June 2018, the parties referred a dispute to arbitration and agreed on specific timelines for the arbitration process, including filing dates for statements of claim, responses, and oral evidence. The applicant failed to file its statement of claim by the agreed deadline of 13 July 2018. The applicant's legal practitioners, Messrs Mawere Sibanda, renounced agency on 15 August 2018, citing non-payment of deposit fees. On 20 September 2018, following the respondent's request, the arbitrator terminated the arbitration proceedings under Article 25(a) of the Arbitration Act [Chapter 7:15] on the basis that the applicant/claimant had failed to file a statement of claim and had not provided any explanation for the failure. The applicant subsequently sought to set aside the arbitral award, arguing that it was not afforded an opportunity to show sufficient cause for its failure to comply with the procedural timelines.

• Whether the arbitration proceedings were properly terminated under Article 25(a) of the Arbitration Act [Chapter 7:15]
• Whether the arbitrator breached the audi alteram partem rule (right to be heard) by terminating proceedings without affording the applicant an opportunity to show sufficient cause for its failure to file the statement of claim
• Whether Article 34 of the Arbitration Act is the proper procedural mechanism to challenge the arbitral award
• What is the effect of termination of arbitration proceedings on the rights of the parties

1. The arbitral award by Honourable Mutangadura dated 20 September 2018 terminating the arbitration proceedings in terms of Article 25(a) of the Arbitration Act [Chapter 7:15] is set aside. 2. The applicant is entitled to refer the dispute to another arbitrator of the parties' choice or, in the absence of such agreed choice, one appointed by the chairperson of the Commercial Arbitration Centre. 3. Each party shall bear its own costs.

An arbitrator terminating arbitration proceedings under Article 25(a) of the Arbitration Act [Chapter 7:15] must afford the defaulting party an opportunity to show sufficient cause for its failure to comply with procedural requirements before terminating the proceedings. The words "without showing sufficient cause" in Article 25(a) impose a mandatory obligation on the arbitrator to hear from the party before concluding that no sufficient cause exists. Failure to do so constitutes a breach of the audi alteram partem rule (the right to be heard), which is a fundamental principle of natural justice. An arbitral award granted in breach of this principle is liable to be set aside under Article 34 of the Arbitration Act.

The court observed that arbitration is a creature of statute and parties' rights cannot be created through a declaratory order. The court noted that seeking a declaratory order to render an award "not final" is improper procedure - analogous to a defaulting party seeking a declarator rather than rescission of a default judgment. The court commented that while a party is at liberty to seek relief as per its draft order, the final order is that of the court and must not only be competent but must accord with the intention of the party and what the party has proved. The court also noted that reinstitution of proceedings terminated through Article 25(a) read with Article 32 is not allowed as long as the award is extant, emphasizing the importance of properly setting aside such an award.

This case is significant in Zimbabwean arbitration law as it reinforces the fundamental importance of natural justice principles, particularly the audi alteram partem rule, in arbitration proceedings. The judgment establishes that even when a party fails to comply with procedural timelines in arbitration, an arbitrator must afford that party an opportunity to show sufficient cause before terminating proceedings under Article 25(a) of the Arbitration Act. The case demonstrates that procedural fairness cannot be sacrificed for expediency, and that arbitrators must ensure both parties are heard before making determinations that affect their substantive rights. It also clarifies that courts have the power to reformulate relief when the substance of an application justifies intervention under Article 34, even if the relief sought is improperly framed as a declaratory order.