Richard Alwyn Matthews v The Honourable Mr Justice A. Ebrahim and Umeshkumar Dwarkadas Kotecha and Dhirubhai Maganlal Desai

In 2003, the applicant constituted the Matthews Family Trust, which was the sole shareholder in the Craster Group of Companies. In September 2008, the Trust Deed was amended to make the applicant and the second and third respondents beneficiaries. A Memorandum of Agreement was signed providing for the applicant to surrender control of the companies to the respondents over three years, with detailed provisions for sharing profits and risk. The agreement did not expressly provide for sharing of losses. When liabilities were disclosed in August 2009, revealing losses of US$935,626.40 for the period August 2008 to July 2009, a dispute arose regarding how (if at all) these losses should be shared and their quantum. The matter was referred to arbitration before the first respondent. The arbitrator ordered that losses be shared in the same proportions as risk (51%-49%, 68%-32%, 84%-16% over the three-year period) and directed that if parties could not agree on quantum within 30 days, the issue would be referred to a Chartered Accountant appointed by the President of the Institute of Chartered Accountants. The applicant sought to set aside this arbitral award.

• Whether the arbitral award was in conflict with the public policy of Zimbabwe in determining that losses should be shared in the same proportion as risk when the agreement was silent on sharing of losses
• Whether the arbitrator's delegation of the determination of quantum of losses to a Chartered Accountant to be appointed by the President of the Institute of Chartered Accountants was contrary to Article 26 of the Schedule to the Arbitration Act
• Whether the award violated the rules of natural justice by not providing for the expert to report to the arbitrator or for parties to cross-examine the expert or lead their own expert evidence
• The proper test for setting aside an arbitral award under Article 34 of the UNCITRAL Model Law on the grounds of public policy

The arbitral award rendered by the first respondent on 20 December 2011 was set aside. The second and third respondents were ordered to pay the costs of the application jointly and severally, the one paying the other to be absolved. The court left it to the parties to determine the future course of the matter.

An arbitral award is contrary to public policy and must be set aside under Article 34(2)(b)(ii) of the UNCITRAL Model Law where the arbitrator delegates the appointment of an expert to a third party and directs that the expert make a binding determination without reporting to the arbitrator, in violation of Article 26 of the Schedule to the Arbitration Act. Article 26 requires that: (1) the arbitral tribunal itself appoint any expert; (2) the expert report to the arbitral tribunal on specific issues for the tribunal's determination; (3) parties be given opportunity to cross-examine the expert; and (4) parties be permitted to lead their own expert evidence. An award that contravenes these express statutory provisions violates fundamental principles of procedural fairness and natural justice, constituting a breach of public policy warranting the setting aside of the award.

The court observed that not every mistake of fact or law warrants setting aside an arbitral award - the incorrectness must be so serious as to constitute a subversion and negation of justice and fairness. The court noted that in exercising powers under Articles 34 and 36, it does not sit as an appellate court and is not required to substitute what it considers the correct decision. The court also commented that where an arbitrator's determination that losses should be shared in the same proportion as risk (where the agreement is silent on losses but provides for staged transfer of control and risk), this does not constitute a palpable inequity, particularly where the agreement was not an ordinary sale but concerned making parties beneficiaries of a trust, and where the applicant continued to benefit from the companies during the transition period. The court stated that when an expert is appointed to make a determination rather than report to the arbitrator, this effectively elevates the expert to the position of an arbitrator, contrary to the statutory scheme.

This case is significant in Zimbabwean arbitration law for clarifying the procedural requirements under Article 26 of the Arbitration Act regarding the appointment and use of experts by arbitral tribunals. It establishes that arbitrators cannot delegate their power to appoint experts to third parties and must ensure that experts report to the tribunal, not make binding determinations themselves. The case also reinforces the principle that while courts apply a restrictive approach to setting aside arbitral awards on public policy grounds, awards that violate express statutory provisions will be set aside as they undermine fundamental principles of procedural fairness and natural justice. The judgment demonstrates the balance between respecting the finality of arbitration and ensuring compliance with mandatory statutory procedures designed to protect parties' rights to a fair hearing.