Judge declares Drax, NatPharm deal valid

THE cancellation of the 2019 contract between Drax Consult SALG and NatPharm for the supply of medicines and related sundries was improper, the High Court ruled yesterday, since the tender had been approved by the Procurement Regulatory Authority of Zimbabwe (PRAZ) and therefore was a legally enforceable contract.

This judgment by Justice Webster Chinamora overturns an arbitration award made on March 1 this year that allowed NatPharm to cancel the tender on the grounds that it was concluded in contravention of the provisions of the Public Procurement and Disposal of Public Assets Act.

The deal was cancelled in June last year.

Specifically NatPharm now needs, as a result of the court ruling, to accept delivery and pay for US$210 000 worth of medical supplies sitting at Robert Mugabe International Airport since last year when the contract was cancelled, the last part of the delivery of US$2 733 480 of medical supplies to NatPharm.

When NatPharm refused to accept the final portion of the tender as a result of this cancellation, the matter was referred for arbitration.

NatPharm won the arbitral award with the arbitrator accepting it had cause to cancel the tender.

"The agreement entered into between the parties is found to be illegal and unenforceable for want of compliance with section 15 of the Public Procurement and Disposal Act," the arbitration decision read.

Drax then approached the High Court to set aside this award arguing that the cancellation was unlawful since PRAZ had given its authority as required by the Public Procurement Act.

The critical evidence, in Justice Chinamora's view, was a letter written on November 6, 2019, by the chief executive officer of PRAZ to the managing director of NatPharm.

The judge noted that legal counsel for both Drax and NatPharm missed the point that a resolution of the Special Procurement Oversight Committee, quoted in this letter, had been adopted by PRAZ as its own resolution and so PRAZ gave authority to NatPharm. While the oversight committee might not have authority under the law to confirm the tender, PRAZ certainly did. The judgment went into detail on why the final authority was clearly given by PRAZ.

The judge underlined four crucial points in connection with this letter from the top executive of PRAZ to his counterpart at NatPharm.

Justice Chinamora noted that the letter was written on the PRAZ letterhead, so PRAZ unequivocally assumed ownership of the letter.

The letter was authored by the PRAZ chief executive officer who made it clear that the letter had been written on behalf of PRAZ and not the subordinate oversight committee. The letter gave

NatPharm authority to procure medicines and surgical sundries from Drax Consult SAGL, under Tender NAT DP19/2019.

After acknowledging the resolution by the oversight committee the letter proceeded to advise NatPharm to "take all necessary steps as directed by the resolution . . ." which Justice Chinamora said meant PRAZ adopted the resolution made by the committee as its own.

The net effect was that PRAZ gave authority to NatPharm. Justice Chinamora said there was nothing ambiguous about the letter, and it required no elaborate interpretational aids to decipher its meaning.

The Arbitration Act allowed the setting aside of an arbitral award by the High Court in specified circumstances, the judge noted when he addressed the question of whether the High Court had the right to overturn an arbitration award.

Justice Chinamora found that the arbitrators, if they had examined the November 6 2019 letter, could not plausibly have made a finding of illegality of the contract. While he could not review the arbitrators' decision he was merely bringing to the fore that the award is offensive to the public policy of Zimbabwe.

"The angle I have taken is that it offends public policy in the sense of being so outrageous in its defiance of logic or accepted moral standards that a sensible and fair-minded person's conception of justice in Zimbabwe would be intolerably hurt.

"My view in this regard has not been reached out of turn for two reasons. Firstly, it is illogical for any fair-minded person to conclude that a contract which has been sanctioned in terms of the law by the body empowered to give its blessing is unlawful. Secondly, public policy dictates that a contract done within the terms of the law should be respected."

The court also found that NatPharm did not deny receiving medicines worth US$2 733 480 from Drax and had not disputed that it refused to pay for the supplies. NatPharm asserted that it could not pay because the contract is illegal for not complying with the Procurement Act.

"Therefore, the injustice arising from a finding of illegality, in my view, reaches the point of offending the public policy of Zimbabwe," said Justice Chinamora.

In light of the conclusion that the letter dated November 6, 2019, was written by PRAZ and adopted the conclusion of the oversight committee as its own, he was satisfied that Drax was entitled to the relief it sought and the paragraph of the arbitral award designating the contract illegal was thus set aside.

Drax local representative Delish Nguwaya and former health minister Obadiah Moyo who were arrested in connection to corruption charges relating to the contract and three NatPharm top executives have since been removed from remand. They can now only be brought to court on a summons backed by new evidence.