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Australian company loses suit against Blanket Mine



THE High Court in Harare has dismissed an application by Australian-registered company Mining Engineering Consulting Services (Pty) Ltd, in which it accuses mining the firm Blanket Mine of unlawfully terminating a contract for the supply of equipment.

 Mining Engineering’s business includes specialised shaft sinking and equipping services at mining locations.

 Blanket Mine, an underground gold mine, is operated by Caledonia Mining, which holds a 64% stake, while the remaining 36% is owned by Zimbabwean shareholders. The mine currently processes approximately 1 200 tonnes of ore a day.

 In terms of the contract between the companies, Mining Engineering would provide specialised shaft sinking and equipping services at a mining location run by Blanket Mine, which was at some point terminated by Blanket Mine.

Mining Engineering did not accept the reasons for the termination, and therefore demanded a payment in the sum of AUD$279 425.21 (US$183 249.56) for the final invoice which it said to be outstanding.

 Blanket Mine withheld the payment on the basis of its own concerns against Mining Engineering regarding previous invoices which it considers had been overstated.

The dispute was referred to arbitration where Mining Engineering made three claims: the first relating to the outstanding invoice aforesaid, in the sum of AUD$279 425-21; the second being damages in the sum of AUD$5 235 316-32 (US$3 434 576.70) for unlawful termination of the agreement, and the third and final one being a claim in the sum of AUD$5 765.02 for the value of the equipment retained by Blanket Mine, according to the High Court ruling seen by The NewsHawks.

Arbitration is an alternative dispute resolution process where parties agree to have a neutral third party (the arbitrator) resolve their dispute instead of going to court.

Blanket Mine raised a plea that the question of the unlawful termination of the agreement and that for compensation for the undelivered equipment fell outside the scope of the arbitrator’s authority, and that therefore the arbitrator had no jurisdiction to determine them on the current referral. The arbitrator upheld Blanket Mine’s plea. An aggrieved Mining Engineering approached the High Court to set aside the arbitrator’s decision to find for compensation.

“Its argument is basically that the arbitrator misconstrued the position of the law in believing that arbitration should always be preceded by a declaration of claims; that he conflated the issue of jurisdiction and that of scope of authority; that the issue that was before him was that of jurisdiction rather than scope of authority; that manifestly he has the jurisdiction to deter[1]mine the contractual dispute that was referred to him and that his approach violates the ‘once and for all rule’ which dictates that one must include in a single process all one’s claims arising from the same cause of action,” reads the charge sheet.

 “Mining Engineering further argues that par[1]ties to an arbitration are not required to agree on the identity or number of claims before the arbitrator can exercise jurisdiction.”

In reply, Blanket Mine argued that the sole dispute raised by Mining Engineering upon which it agreed not only to go to arbitration but also as to the choice of the arbitrator was that in relation to the outstanding invoice.

 “The claims for damages by Mining Engineering Consulting Services [Pty] Ltd v Blanket Mine [1983] [Pvt] Ltd for unlawful termination of the contract and for the return of equipment were not referred to arbitration.

“Blanket Mine further argues that the approach by Mining Engineering violates both the Model Law and the actual agreement between the parties in that in terms of Art 21 of the Model Law, arbitration commences on the date upon which the request by the one party to refer a particular dispute to arbitration is received by the other party, and that in terms of the agreement, only when the nature of the claim was identified would it be possible to choose an arbitrator given that he or she has to be professionally qualified in the fields specified by the contract, namely accounting, law or technical.” However, High Court judge Joseph Mafusire has upheld the decision dismissing the application by Mining Engineering with costs.

“The application cannot succeed. The arbitrator’s decision cannot be faulted. The dispute before the arbitrator was on the whole question of jurisdiction, in both the narrower and wider senses. Scope of authority is a species of jurisdiction. In any given case it is up to the parties to identify the species of jurisdiction relied upon in any challenge as to the arbitrator’s capacity,” reads the judgment.

 “In casu, the challenge was on the scope of authority given what had been placed before the arbitrator. “Courts shall follow the result. But there is no justification to award them on the higher scale as Blanket Mine prays. The applicant has raised pertinent points that have required closer scrutiny. There is no reason to mulct it in costs. In the circumstances, the application is hereby dismissed with costs.”

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