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Fidelis Munyoro Chief Court Reporter
The 2019 contract between Drax Consult SALG and NatPharm for the supply of medicines and related sundries is binding, the Supreme Court ruled yesterday, but this will result in NatPharm having to accept and pay US$210 000 of medical supplies.
The judgment effectively nullifies the pharmaceutical company’s bid to reverse a High Court decision validating the deal.
NatPharm had approached the appeal court to set aside the November 30 2021 High Court decision which reversed the cancellation of the deal, which had been approved by the Procurement Regulatory Authority of Zimbabwe (PRAZ) and, therefore, was a legally enforceable contract.
High Court judge Justice Webster Chinamora had overturned an arbitration award made in March 2021, that allowed NatPharm to cancel the tender on the grounds that it was concluded in contravention of the provisions of the Public Procurement and Disposal of Public Assets Act.
The deal was cancelled in June 2019. But on appeal, the Supreme Court upheld the lower court decision.
NatPharm now needs, as a result of the court ruling, to accept delivery and pay for US$210 000 worth of medical supplies sitting at Robert Mugabe International Airport since 2019, when the contract was cancelled, the last part of the delivery of US$2 733 480 of medical supplies to NatPharm.
When NatPharm refused to accept the final portion of the tender as a result of this cancellation, the matter was referred for arbitration.
In the Supreme Court, NatPharm sought to nullify the lower court decision. The grounds of appeal only raised a single issue, namely, whether or not the contract of procurement was approved by PRAZ in terms of s 15 (1) of the Act.
However, the pharmaceutical firm in its appeal failed to test the substantive finding of Justice Chinamora, that the arbitral award was contrary to the public policy of Zimbabwe.
A three-judge bench of Justices Chinembiri Bhunu, George Chiweshe and Joseph Musakwa upheld the judgment of Justice Chinamora in the lower court after considering the law as to how the High Court should exercise its powers under Article 34 or 36, of the Arbitration Act, particularly when an arbitral award can be set aside if its enforcement would offend the public policy of Zimbabwe.
“The court a quo (lower court) also correctly stated the law in so far as the converse position is acceptable, that is, an arbitral award should not be set aside unless the arbitrator’s reasoning or conclusion is so flawed as to violate some fundamental principle of law or morality or justice,” said Justice Chiweshe.
“The court a quo further observed that an award may be set aside as being contrary to the public policy of Zimbabwe if it is so outrageous in its defiance of logic or recognized moral standards that a sensible and fair-minded person would consider that the conception of justice in Zimbabwe would be intolerably hurt by the award
“It is also trite that the mere faultiness or incorrectness of an arbitral award cannot, on its own, be the basis upon which an award may be set aside. The award must, in addition, offend the public policy of Zimbabwe.
Conversely, if the procurement entity obtains PRAZ approval and enters into a legally binding contract, it would be contrary to the law and the public policy of Zimbabwe to declare such contract illegal and proceed to set it aside.
While NatPharm sought to argue that that the letter does not constitute authority given in terms of s 15 (1) and (2) of the Act, claiming it was written on behalf of Special Procurement Oversight Committee (SPOC), a subcommittee of PRAZ, which cannot exercise the powers of PRAZ, Drax argued to the contrary, insisting that the letter originates from PRAZ itself.
The letter was the subject of intense scrutiny by the lower court, and the judges at the Supreme Court based on the proper findings made by Justice Chinamora upheld and validated the contract between Drax and NatPharm.
To this end the court ruled that the finding of fact on the part of the lower court could not be faulted, because it was based on the evidence placed before it.
Though Natpharm argued that the letter of November 6 2019 originated from SPOC and could not have been the authority required under s 15 of the Act, the court ruled the view was not supported by the evidence.
“As correctly observed by the court a quo, the letter originated from PRAZ, Justice Chiweshe said, adding, the fact that the letter made reference to SPOC resolutions did not alter the fact that it was the Chief Executive Officer of PRAZ who wrote on behalf of that authority.
The court also noted that it was inconceivable that a procurement authority of the stature of Nat Pharm could have engaged in procurements of such magnitude without the approval of PRAZ.
“Surely, they must have relied on the letter from PRAZ of 6 November 2019 which letter was addressed to their managing director, with detailed instructions as to how the appellant should proceed. One wonders why the appellant now seeks to resile from that arrangement,” queried Justice Chiweshe in his judgment.
The November 2019 letter was one of the papers placed before the arbitrators and would have been one of the documents to be considered before issuing the award and the Supreme Court found that if it was not considered, then the Arbitrators did not take into account relevant information before them.
The court accepted Justice Chinamora’s view that the arbitrators failed to apply their minds to the import of the letter hence wrongly arrived at the decision that the contract was illegal for non-compliance with the provisions of the Act.
Where the arbitrator has not applied them-self to the question or has totally misunderstood the issue, and the resultant injustice reaches intolerable prejudice, then the arbitral award must be set aside.
The Supreme Court ruled that Drax stood to lose substantial sums where NatPharm refused to pay for medicines accepted and used.
“The court a quo found that the injustice arising from a finding of illegality reached the point of offending the public policy of Zimbabwe. We therefore find no fault with the court a quo’s findings of fact and law,” ruled Justice Chiweshe, finding that the lower court’s reasoning could not be faulted, but should be upheld, with costs of suit.
NatPharm won the arbitral award with the arbitrator accepting it had cause to cancel the tender.
Drax then approached the High Court to set aside this award arguing that the cancellation was unlawful since PRAZ had given its authority as required by the Public Procurement Act.
The critical evidence, in Justice Chinamora’s view, was a letter written on November 6, 2019, by the chief executive officer of PRAZ to the managing director of NatPharm.
The judge noted that legal counsel for both Drax and NatPharm missed the point that a resolution of the Special Procurement Oversight Committee, quoted in this letter, had been adopted by PRAZ as its own resolution and so PRAZ gave authority to NatPharm.
While the oversight committee might not have authority under the law to confirm the tender, PRAZ certainly did. The judgment went into detail on why the final authority was clearly given by PRAZ.
The judge underlined four crucial points in connection with this letter from the top executive of PRAZ to his counterpart at NatPharm.
Justice Chinamora noted that the letter was written on the PRAZ letterhead, so PRAZ unequivocally assumed ownership of the letter.
The letter was authored by the PRAZ chief executive officer who made it clear that the letter had been written on behalf of PRAZ and not the subordinate oversight committee.
The letter gave NatPharm authority to procure medicines and surgical sundries from Drax Consult SAGL, under Tender NAT DP19/2019.
Advocate Thembinkosi Magwaliba instructed by Costa and Madzonga represented NatPharm while Advocate Edley Mubaiwa instructed by Samukange, Hungwe Attorneys, acted for Drax Consult SGL.
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