Riogold (Private) Limited v Falcon Gold Zimbabwe Limited and Thembinkosi Magwaliba N.O.

The applicant (Riogold) and the first respondent (Falcon Gold) entered into a share sale agreement on 30 September 2016, whereby the first respondent sold its entire issued share capital in Palatial Gold Investments (Private) Limited, which operated Dalny Mine. The mine had ceased operations in August 2013. Prior to the sale, 716 persons (Mabeka and others) claimed to be employees of Dalny Mine and lodged a claim with the Ministry of Labour in April 2017 for salary arrears totaling US$10,129,360. The applicant was notified of these claims before the completion date but proceeded with the transaction. The applicant later sought indemnification from the first respondent against liabilities arising from the alleged employees, claiming the first respondent failed to disclose the employment status of 813 employees and breached various warranties in the agreement. The matter was referred to arbitration. The arbitrator (second respondent) dismissed the applicant's claims, finding that adequate disclosure had been made and that the applicant had suffered no loss. The applicant then applied to the High Court to set aside the arbitral award on the grounds that it violated public policy.

• Whether the arbitral award should be set aside on the ground that it conflicts with public policy of Zimbabwe
• Whether the arbitrator erred in finding that adequate disclosure was made regarding the employment status of 813 employees
• Whether the arbitrator correctly interpreted the indemnity clause in the share sale agreement
• Whether the applicant was entitled to indemnity before suffering actual loss
• Whether the arbitrator failed to properly interrogate the evidence before him

The application to set aside the arbitral award was dismissed. The applicant was ordered to pay the first respondent's costs of suit on the ordinary scale.

An arbitral award can only be set aside on public policy grounds under Article 34(2)(b)(ii) of the Model Law to the Arbitration Act where the reasoning or conclusion goes beyond mere faultiness or incorrectness and constitutes a palpable inequity that is so far-reaching and outrageous in its defiance of logic or accepted moral standards that a sensible and fair-minded person would consider that the conception of justice would be intolerably hurt by the award. The public policy defense must be construed narrowly to preserve the basic objective of finality in arbitrations. Courts do not exercise appellate jurisdiction over arbitral awards and will not interfere merely because they might have reached a different conclusion on the facts or law.

The court made several observations about proper pleading practices: (1) Founding affidavits in applications to set aside arbitral awards should clearly set out the basis for the attack on public policy grounds, rather than attempting to re-argue the merits of the arbitration; (2) Annexures to affidavits should not be attached as a formality but their relevance must be explained with sufficient exactitude; (3) An application must stand or fall on the founding affidavit. The court also noted with concern that the applicant's 18-page founding affidavit with 480 pages of attachments was unnecessarily long, convoluted, and contained no cross-references to the enclosed documentation. The court expressed that while it had grave concerns about the manner in which the applicant pleaded its case, this alone did not justify costs on the higher scale, particularly where the respondent did not advance reasons to support such a claim.

This case provides important guidance on the narrow grounds for setting aside arbitral awards on public policy grounds in Zimbabwe. It reinforces that courts will adopt a restrictive interpretation of public policy to preserve the integrity and finality of the arbitration process. The case also clarifies the interpretation of indemnity clauses in commercial contracts, particularly that indemnity typically requires actual loss to have been suffered before a claim can be made. The judgment demonstrates the high threshold applicants must meet when challenging arbitral awards - showing not mere errors but fundamental violations of logic or morality. It also emphasizes the importance of proper pleading in applications to set aside awards, distinguishing between re-arguing the merits and attacking the award on permissible grounds.