Source: http://zimbabwelawreports.com/2016-2/dominion-trading-fz-llc-v-victoria-foods-pvt-ltd.html
Timestamp: 2019-04-19 15:21:53+00:00

Document:
Arbitration – Arbitration clause – Whether it precludes a litigant from applying for an interdict in securitatem debiti.
Practice and procedure – Interdict in securitatem debiti – Whether requirements are same as those of an interim interdict.
The applicant and respondent entered into a series of commodity supply contracts in terms of which the applicant sold the respondent wheat, rice and maize. With regard to the governing law and arbitration, the contract stipulated that English Law and jurisdiction would apply. Other terms were governed by the Grain and Feed Trade Agreement (“GAFTA”) 100 and GAFTA 125. The respondent defaulted payment for some of the supplies and the applicant then brought the matter for arbitration at GAFTA. In the proceedings before GAFTA, respondent allegedly indicated that by its own calculations, it owed the applicant the sum of US$ 2 347 709. Based on the alleged admission, the applicant made an application for an interdict in securitatem debiti for the admitted amount. The respondent objected to the application on the ground that the court is precluded from hearing the application by reason of the existence of the arbitration agreement between the parties and that the court could only interfere in pending arbitration proceedings in the limited circumstances set out in the Arbitration Act, 1996 [Chapter 7:15].
Held, that Art 9 (1) of the First Schedule to the Arbitration Act means that any time before or after arbitration has commenced, a party to arbitral proceedings can approach a court with a request or application for interim protection. Such protection may be in respect of the amount subject of the claim or the costs of arbitration. An application made under Art 9 of the First Schedule must be construed as being made in aid of arbitration rather than as against the efficacy of arbitral proceedings.
Held, further, that Art 17 (4) of the First Schedule expressly imports the requirements of an interlocutory interdict in the determination of an application for interim protection measures. There is no requirement of law that an applicant for an interlocutory interdict in securitatem debiti must show that the respondent has no bona fide defence to the action. The legal requirements for such an interlocutory interdict are no different from the legal requirements for any other interlocutory interdict.
“English Law and jurisdiction to apply to this contract.
(a)	Any and all disputes arising out of or under this contract or any claim regarding the interpretation or execution of this contract shall be determined by arbitration in accordance with the GAFTA Arbitration Rules, No 125, in the edition current at the date of this contract, such Rules are incorporated into and form part of this contract and both parties hereto shall be deemed to be fully cognisant of and to have expressly agreed to the application of such Rules.
(b)	Neither party hereto, nor any persons claiming under either of them shall bring any action or other legal proceedings against the other in respect of any such dispute, or claim until such dispute or claim shall first have been heard and determined by the arbitrator(s) or a board of appeal, as the case may be, in accordance with the Arbitration Rules and it is expressly agreed and declared that the obtaining of an award from the arbitrator(s) or board of appeal, as the case may be, shall be a condition precedent to the right of either party hereto or of any persons claiming under either of them to bring any action or other legal proceedings against the other of them in respect of any such dispute or claim.
In general terms, the respondent ordered from the applicant who supplied a variety of commodities including wheat, maize and rice. Payment for the commodities supplied in terms of the contracts would be due for settlement within 30 to 60 days from the date of delivery. English Law and jurisdiction was to apply to each of the contracts and all the disputes were to be resolved by arbitration in the United Kingdom under the auspices of the GAFTA in accordance with GAFTA 125. The rest of the provisions would be in terms of GAFTA 100. The applicant averred in its founding affidavit that the respondent’s liability to pay has never been in dispute as demonstrated by the correspondences between the parties. When the applicant sued in Zimbabwe the respondent raised the defence that the matter was subject to arbitration at GAFTA. The applicant then brought the matter for arbitration at GAFTA where it is still pending. In the proceedings before GAFTA, respondent indicated that by its own calculations, it owed the applicant the sum of US$ 2 347 709. It is on the back of this admission which also informed the award by the arbitral tribunal, that the applicant makes the application for security to be given for the admitted amount.
The respondent, on the other hand denies that it ever admitted owing the sum claimed in the application for security of the claim. In its founding affidavit, the respondent gives a background of how the applicant has always tried to avoid an audit of the execution of the contracts initiating litigation and whilst at the same time submitting the matter for arbitration. The respondent goes on to give a detailed history of the different steps taken by the applicant to obtain relief in various fora. It seems to me that in a way the actions by the applicant serve to show its frustrations with the dilatory behaviour displayed by the respondent when it had taken delivery of goods and disposed of the same without honouring its obligation to pay for the same. Therefore, to my mind the effect of these efforts was not to be unnecessarily litigious but to get resolution quickly. The respondent contends that since it has filed an appeal against the award by the arbitral tribunal, the matter is therefore lis pendens and not yet finalised and, as such, the award is not binding. The respondent contends that it has never admitted the amount claimed in the present application or awarded by the GAFTA Arbitral Tribunal. The respondent consequently argues that there are currently pending proceedings in which the question of both its liability and quantum will be finally determined. Finally, respondent contends that the present application is an attempt by the applicant to obtain through the back door, both judgment over a disputed amount and secure that judgment without making the necessary application for registration of an arbitral award. Consequently, the respondent urges this Court to dismiss the application.
Firstly, the respondent contends that this Court is precluded from hearing the present application by reason of the existence of an arbitration agreement between the parties and by law. The respondent argues that this Court can only interfere in pending arbitration proceedings in the limited circumstances set out in the Arbitration Act [Chapter 7:15] (“the Act”). The respondent argues that on the facts, the applicant has not alleged any of the circumstances set out in the Act as existing. The relief sought is therefore not supported on the facts relied upon in the application.
Does this Court have jurisdiction over the subject matter?
(1)	It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from the High Court an interim measure of protection and, subject to paragraphs (2) and (3) of this article, for the High Court to grant such measure.
(d)	any other order to ensure that any award which may be made in the arbitral proceedings is not rendered ineffectual.
and the High Court shall not grant any such order or interdict where the arbitral tribunal, being competent to grant the order or interdict, has determined an application therefore.
The parties by agreement have committed to the provisions of both GAFTA 125 and GAFTA 100 which constitute part of their contract. This clause in my view vests this Court with jurisdiction to afford interim security measures of protection for the amount claimed. The express reference to “legal proceedings in any jurisdiction” renders the respondent’s argument invalid. Given this premise, therefore, I find that the objection to jurisdiction is not well taken. It is dismissed.
The respondent argues that the grant of the order sought would amount to granting applicant a final order in a contested matter before that matter is finally determined. In other words, the respondent attacks this application as an attempt by the applicant to secure by the back door final relief whilst at the same time circumventing the provisions of Art 35 of the First Schedule to the Act. Article 35 of the First Schedule requires a party to register at this Court an award for the purposes of enforcement. I do not see how a grant of the order sought would obviate the specific requirement to register for the purposes of enforcement. Any order from another tribunal will have to be registered before it can be enforced. This much is trite. In any event, an order to secure an admitted claim does not in any way show either preference over other creditors or that a sale in execution would follow without due process. An application made under Art 9 of the First Schedule must be construed as being made in aid of arbitration rather than as against the efficacy of arbitral proceedings. The order sought, in my view, secures the claim in the event that the applicant succeeds in the final determination of the matter by the arbitral tribunal. It renders the order sought enforceable. It is an encumbrance on the immovable property in support of the arbitral proceedings so as not to render them ineffectual, nothing more. I am persuaded by this argument.
The next point made in opposition to the application is that the applicant has not made a case for the grant of the relief sought. In particular, it is argued that upon reference to Art 9 of the First Schedule, it is contended by the respondent that applicant has not shown that the arbitral tribunal is not competent to grant the relief it seeks – see Art 9 (3)(b). Put differently, the contention by the respondent is that there is no case for the grant of the interim relief sought.
A careful examination of the proper basis for the grant of this type of relief is necessary.
The Arbitration Rules of the GAFTA Rules allow claimants to avail themselves of a unique protection in the form of interim relief – to seek payment of security for the amount of a claim or counter-claim. For example, a claimant that has commenced arbitration proceedings against a respondent that looks likely to become insolvent in the near future, may make an application to the arbitral tribunal for an order that the respondent secures the amount in dispute (by a bank guarantee or deposit payment), so that the claimant is protected in terms of enforcement if an award is made in its favour. This provision differs from the more widely available power to order security for costs, which, in general terms, allows a court or tribunal to require the provision of security for the legal costs of defending a claim or counter-claim.
If a claimant successfully obtains an order for a respondent to pay security for the claim (and the order is complied with), this guarantees that payment will be made in full and promptly following any award made in the claimant’s favour. This exceptional provision in the GAFTA Rules provides significant comfort to claimants in pursuing arbitration proceedings in circumstances where there is a risk of non-compliance or insolvency on the part of the respondent. It is also a feature that may amount to a “unique selling point” for the GAFTA Rules to be chosen in arbitration agreements, especially where it is anticipated that enforcement of an award may prove problematic.
•	there must be a reasonable possibility that the applicant will succeed on the merits of the claim.
There is no requirement of law that an applicant for an interlocutory interdict in securitatem debiti must show that the respondent has no bona fide defence to the action. The legal requirements for such an interlocutory interdict are no different from the legal requirement for any other interlocutory interdict – see Knox d’Arcy Ltd and Others v Jamieson and Others 1994 (3) SA 700 (W). Once a prima facie right has been made out then protection must be afforded – see Airfield Investments (Pvt) Ltd v Minister of Lands & Ors 2004 (1) ZLR 511 (S) at 517C-E.
In my view, when read together with the rest of the papers, it cannot be denied that the respondent accepts that some amount is due. Consequently, the existence of the debt is admitted as fact. In my estimation, faced with this and other evidence, the Arbitration Tribunal was constrained to make the award it did. This constitutes a prima facie right the basis for which the interlocutory interdict is made.
(i)	The respondent be and is hereby ordered to make payment of the sum of US$ 2 374 709 within seven days of today’s date into the account of the Registrar of the High Court of Zimbabwe as security for the admitted amount, pending the final determination of the GAFTA arbitration.
(ii)	The respondent be and is hereby ordered to register a mortgage bond in favour of the applicant, over the immovable property known as Stand number 83 Willowvale Township of Stand 50A, Willowvale Township measuring 1 5604 hectares held under deed of transfer DT 4967/90 within seven days of the order being granted by this Honourable Court, and in the event that the respondent fails or neglects to comply with the terms of this order, then in that event, the Sheriff or his lawful deputy be and is hereby allowed and permitted to do all things necessary and complete all paperwork related to the registration of the mortgage bond over the aforementioned property, including signing all the necessary papers and documents, including the power of attorney to pass mortgage bond to enable the Registrar of Deeds to register the said mortgage bond.
(iii)	Respondent to pay the costs of suit.

References: Art 9
 Art 9
 Art 17
 Art 35
 Art 9
 Art 9
 Art 9