SEED CO Limited has successfully sued a soya bean farmer to recover US$274 768 after financing the farming production before the farmer sold the product to another company.
The seed company had dragged Christian Falkenberg to the High Court after he raised a special plea against Seed Co’s claim for the US$274 768 as damages for alleged breach of contract.
Sometime in November 2022, Seed Co and Falkenberg concluded a soya bean crop financing and production contract.
The principal terms were that Seed Co supplied Falkenberg with foundation soya bean seed of a type known as SC Spike Variety.
In turn, Falkenberg was obliged to plant and manage 100 hectares of the seed and on maturity, he was mandated to deliver 250 metric tonnes of certified seed to Seed Co.
Falkenberg, in breach of contract, diverted 132 metric tonnes of certified seed through a practice known as “side marketing” and delivered 118 metric tonnes to Seed Co, leading to the litigation.
In defence, Falkenberg raised the special plea of arbitration arguing that the matter be referred to the arbitration since there is an existence of dispute between the parties.
Seed Co, however, took the view that there was no dispute between the parties saying the question of liability was clear that Falkenberg had not delivered in terms of the contract, arguing that there was nothing warranting a referral for arbitration.
- Seed Co muscled out of Pfumvudza
- The hits and misses of 2022 (I)
- Seed Co VFEX ambition back on track
- Cricket reaps benefits of fan engagement initiatives
Keep Reading
The applicant argued that the contract had two dispute resolution clauses which provided for institution of legal proceedings in the High Court in the event of breach and that the arbitration agreement which operated exclusive of clause 6.1 will examine the arguments in greater depth.
Seed Co insists that it is clear Falkenberg breached clauses of the agreement and that these clauses prohibit, in the main, the diversion of product under the concept of side-marketing.
High Court judge Justice Joseph Chilimbe ruled that the dispute resolution was provided for under two separate provisions and both parties were alive to the distinction.
“Seed Co appropriated to itself the right and option to institute proceedings in a court of law in the event of a side-marketing breach. The co-existence of these two clauses in the same agreement generated a number of conclusions,” Justice Chilimbe said.
“The arbitral agreement must not be ‘null and void’, neither should it be proven inoperable or unimplementable. The court is therefore required to start and end its inquiry with the parties’ contract. But in examining the contract, its purview is prescribed by the need to ascertain validity and practicality.
“This examination should, in my view, be driven by the pragmatism deriving from the purpose and envisaged benefits of arbitration as an alternative dispute resolution facility.”
The judge said if the parties have a valid arbitral agreement capable of being implemented, the court must, according to Article 8 of the clause, stay the proceedings and refer the matter to arbitration saying that inquiry is a journey into contractual interpretation.
The judge said once it is established that the dispute falls within the ambit of the arbitration clause, the onus to show why court proceedings should not be stayed falls on the party challenging the reference to arbitration.
He ruled that clause 11 of their agreement is undoubtedly an arbitration agreement.
“I am not convinced that the presence of clause 6 in the agreement contaminates the arbitration clause so drastically as to render it supine in terms of Article 8 (1).
“For purposes of giving effect to the parties’ wishes as set out in the contractual clauses, I see no difficulty in granting recognition and priority to clause 11 as the arbitral agreement,” he said.
