daniel chigunwe
Fidelis Munyoro
Chief Court Reporter
The seven-year contractual saga between the National Social Security Authority (NSSA) and a developer it once contracted, Housing Cooperation Zimbabwe (HCZ), has finally reached its conclusion, with the Supreme Court ruling in favour of NSSA.
This multi-million dollar dispute, once entrenched in the corridors of arbitration centres and judicial chambers, has been laid to rest after the Supreme Court overturned a High Court ruling that had awarded HCZ a staggering US$22 million plus interest in damages for lost profits.
This was awarded by the first arbitrator who, said the court, erred in allowing a consequential damages claim that was specifically barred by the initial contract with NSSA.
The court criticised NSSA for sending a fairly junior official to the arbitration hearings. The High Court erred, said the Supreme Court, in confirming this erroneous award and not seeing that NSSA was objecting over contract law, not seeking a special favour as a public entity.
The dispute revolved around a botched deal for the construction of 8 000 houses and flats in Caledonia, Harare, at a total cost of US$304 million.
A week after its formation in 2017, HCZ, a company co-founded by Adam Molai and Stephen Duggan, was handed the colossal project.
However, the ambitious partnership faced problems, culminating in HCZ suing NSSA for breach of contract before an arbitrator, who ruled in its favour.
That decision which HCZ sought to register in the High Court, ignited a legal battle that raged for years.
At the centre of the dispute lay the arbitrator’s award of damages for loss of profit that NSSA vehemently argued were not contemplated in the contract.
NSSA contended that the arbitrator, senior private lawyer Mr Peter Carnegie Lloyd, had effectively rewritten the agreement by awarding consequential damages expressly excluded under clause 22.1 of the contract.
The authority further decried the award as a gross violation of public policy, asserting that such damages could not have been within the reasonable contemplation of the parties at the time of contracting.
The High Court, however, ruled in favour of HCZ, dismissing NSSA’s objections and ordering the registration of the arbitral award.
This ruling, NSSA argued, was flawed on multiple fronts. Not only had the High Court failed to interrogate the arbitrator’s findings critically, but it also misconstrued NSSA’s legal argument as a plea for sympathy, mischaracterising the authority’s position as an appeal to its public nature and the protection of taxpayers’ funds.
NSSA, insisted that its stance was rooted in clear contractual principles, that a party cannot claim damages outside the express terms of the agreement.
The matter escalated to the Supreme Court, where the appeal panel of three judges Justice Antonia Guvava, Justice Tendayi Uchena, and Justice Samuel Kudya, delivered a judgment that not only vindicated NSSA, but also underscored the sanctity of contractual terms.
Justice Guvava, writing for the court, stressed that an arbitral award must be set aside if it is so manifestly erroneous that it brings about a grave injustice.
She noted that the damages awarded by the arbitrator were clearly consequential in nature and so prohibited by the parties’ agreement.
The lower court, she said, had erred in failing to recognise this fundamental breach of public policy.
Justice Guvava dismantled the High Court’s reasoning, pointing out that the judge had aligned too readily with the arbitrator’s findings without subjecting them to the scrutiny demanded by NSSA’s objections.
The damages claimed by HCZ, she explained, were not general damages, as the lower court had classified them, but special or consequential damages that clause 22.1 of the agreement explicitly barred.
As such, the arbitral award stood in stark contravention of the contract, a fatal flaw that rendered it untenable.
The Supreme Court’s ruling also rebuked the procedural missteps that marred NSSA’s initial arbitration hearing.
The authority had sent a relatively junior officer to represent it, a decision that Justice Guvava described as resulting in damaging concessions and a failure to effectively challenge HCZ’s claims.
Yet, despite this miscalculation, the court held that the arbitrator’s decision could not stand when measured against the high bar of public policy.
“The appeal will succeed on this basis,” declared Justice Guvava.
“The issue of the registration of the award, therefore, falls away, as there is no longer an award to register.”
Noting that the High Court’s errors extended to its treatment of the application to set aside the award, she allowed NSSA’s appeal with costs, closing the chapter on a contentious and high stakes legal battle.
Advocate Thabani Mpofu, instructed by Mawere and Sibanda, argued the case on behalf of NSSA, while Advocate Daniel Tivadar, under the instruction of Zigomo Legal Practitioners, represented HCZ.
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