The SAVENDA controversy, scandal

Lusaka High Court

SAVENDA Management Services Limited was recently awarded a whopping US$ 19 million in what has been described as one of the largest court awards in Zambia, which award was reversed by the Supreme Court.

In the next few days, the Daily Nation visits the archives to chronicle the case from its origins

The case, which has raised controversy in some sections of society, dates back to September 2007 when Savenda applied to Stanbic for a lease buy back facility for a printing machine at the cost of US$540,000. It was expressly agreed that the lease payments would be serviced through an overdraft facility with the bank with the bank.

Upon defaulting, Stanbic Bank listed Savenda on the Credit Reference Agency (CRA) as a delinquent debtor but Savenda argued that the listing was done in a bad faith as the bank acknowledged that  a system error caused the balance on the loan facility not to reduce despite the debit order running to the credit of the lease account.

Stanbic admitted indeed the system failure which meant that funds that should have been credited to the Savenda loan account were instead credited to an escrow account, but that after rectification of the error, the account was still in default because not enough money was paid into the account.

The two parties did not reach an agreement or any at all regarding the cause of the default and the matter was referred to arbitration under cause number 2013/HP/ARB/14. On May 24, 2013, the Arbitral Tribunal ruled in favour of Stanbic and awarded the bank K7, 535,237.96 (US$1,363,850.49) as an arbitral award, in default of which the bank was at liberty to seize secured properties, stand 1534 and 255595 Woodlands, Lusaka.

Ordinarily arbitral award should be final but Savenda failed to pay the judgment debt but applied to the High Court to pay in instalments and the then Deputy Registrar ordered that the judgment debt be paid in 12 equal monthly instalments of K627, 939.5 per months.

But Stanbic appealed out of time against the order to pay K627, 9939.5 per month. its lawyers raised a preliminary issue on points of law in the High Court, pursuant to Orders 18 Rule 11 and 33 of the Rules of the Supreme Court (White Book) 1999 edition questioning the decision by the registar to vary the arbitral award.

The bank argued that the proceedings instituted by Savenda and the reliefs the company sought under the said proceedings were improperly before the High Court for lack or want of jurisdiction as under Section 20 (1) of the Arbitration Act number 19 of 2000, an award made by an Arbitral Tribunal pursuant to an arbitration agreement is final and binding on the parties.

Stanbic also argued that under Section 20 (2) of the Arbitration Act, Savenda could only challenge awards made by the Arbitral Tribunal in the High Court on grounds provided under Section 17 (2) of the said Act.

The bank further argued that reliefs sought by Savenda were not provided for under Section 17 (2) or under any other provision of the Arbitration Act, rendering the proceedings improperly before the High Court for lack or want of jurisdiction.

In her ruling of November 7, 2014, Lusaka High Court Judge Judy Mulongoti said it was categorical that an arbitral award was final and binding, both on the parties and any persons claiming through or under them.

Ms. Justice Mulongoti concurred with Stanbic Bank’s submissions that arbitral awards are subject to the High Court supervision only in respect of registration and enforcement.

“This therefore, entails that the proceedings before the Deputy Registrar were irregular…the High Court lacks jurisdiction in this regard and cannot grant the reliefs sought by the respondent (Savenda). High Court only comes in to set aside and for registration purposes as noted.

“The respondent does not seek to set aside the awards and has in fact admitted being indebted and has made some payments towards the debt. Section 20 (3) (of the Arbitration Act) cannot aid the respondent as it provides for what happens when the time for making the application to set aside the arbitration award has expired or refused by the court,” she said.

Ms. Justice Mulongoti added: “In such an instance the arbitration award is enforceable in the same manner as an order of the court.”

She further observed that Savenda’s argument, that reading Section 20 (3) of the Arbitration Act together with Order 36 Rule 9 of the High Court Rules empowers the court to allow for payment in instalments, was utterly flawed and that the cited pieces of legislation were not applicable in the circumstances of the case.

“This court lacks jurisdiction to grant the reliefs sought by the respondent.

I find that the awards are final and binding on the parties. In the net result, the appeal which is pending hearing is dismissed as the proceedings before the Deputy Registrar were a nullity.

“The stay of execution is equally discharged forthwith. Costs to the claimant (Stanbic) to be taxed failing agreement. Leave to appeal is granted.”