The High Court in Lobatse has halted the scheduled sale of the Debswana Diamond Company’s assets, saying an arbitrator will handle the matter. This decision comes amidst a heated dispute with Liftoff Investments over a P38 million contractual agreement for construction work at the Orapa Mine.
The conflict dates to October 2020, when Debswana and Liftoff Investments entered into an agreement for the construction of a new tailings leg-golf at Plant 2, leading to the Dispute Adjudication Board (DAB) involvement.
On January 20, 2023, the sole adjudicator, Patrick Mungo’oo, ruled in favor of Liftoff Investments, ordering Debswana to pay P38,511,246.89 plus interest. The court heard that Debswana, dissatisfied with this decision, sought arbitration. However, delays and disagreements over appointing an arbitrator led Liftoff Investments to seek enforcement of the DAB’s decision through the courts.
On November 23, 2023, the High Court, presided over by Justice Motlhabi, upheld the DAB’s ruling and ordered Debswana to make the payment within 30 days. Faced with the imminent sale of its assets, Debswana argued that such a sale would cause irreparable harm to the company. They stressed the importance of maintaining the status quo until the arbitration process concluded. Debswana pointed out inaccuracies in the notice of the sale. With an arbitrator finally appointed, Debswana proposed providing a bank guarantee of P50 million as security for the judgment debt.
On the other side of the aisle, Liftoff Investments contended that the High Court lacked jurisdiction to stay a decision already confirmed by the Court of Appeal. They maintained that the court could not issue an interim interdict based on assumptions. Liftoff Investments emphasised that Debswana had failed to comply with the court orders to pay the adjudicated amount within the stipulated time. They argued that the enforcement of the DAB’s decision was in accordance with the contract, which required prompt compliance. Additionally, they objected to the unilateral appointment of the arbitrator, claiming it was contrary to the agreed terms and expressed concerns that staying the execution would cause significant prejudice, given that the arbitration proceedings had not progressed.
According to Debswana’s founding affidavit in support of the stay application, the history of appointing an arbitrator was fraught with delays and disagreements. Initially, the parties could not agree on an arbitrator, prompting Debswana to request the Chairman of the Association of Arbitrators (Southern Africa) to appoint one. Advocate PF Rossouw SC was appointed on May 21, 2024, but subsequently withdrew following objections by Liftoff Investments. Advocate C. McAslin SC was then appointed on May 27, 2024. Despite initial objections from Liftoff Investments, both parties eventually accepted his appointment. However, Liftoff Investments launched another application challenging the appointment process, further delaying the arbitration proceedings.
In its answer to the application, Liftoff Investments contended that Debswana was relitigating issues already decided by Justices Motlhabi and Makhwe at the High Court and by Justice Tebogo Maruping at the Court of Appeal. They contended that the High Court does not have the power to stay a decision confirmed by the Court of Appeal and that they would suffer great prejudice as pleadings had not been filed before the arbitrator, and the arbitrator had not even dealt with jurisdiction issues. They added that the scale of justice tilted in their favor for payment to be made and the stay to be refused. Liftoff further contended that even if there were pending arbitration, the contract required prompt compliance with the DAB’s decision.
Debswana, on the other hand, argued that the dictates of justice and fairness obliged the court to stay the execution of the judgment until the outcome of arbitration proceedings. They claimed that Justice Motlhabi’s order was interim and subject to alteration by an arbitrator or court. Debswana also contended that Liftoff Investments focused solely on obtaining payment of the judgment debt without advancing the arbitration process, despite the DAB’s decision not being final. They asserted that the balance of convenience favored them as they would never recover their assets if sold at a lower value than their worth, over a debt that could be reversed at the conclusion of arbitration. They emphasised that the facts had changed with the appointment and acceptance of an arbitrator and the commencement of arbitration proceedings.
Rendered on June 7, 2024, Justice Walia, along with Justices Lesetedi and Tebogo-Maruping, emphasised the necessity for judicial enforcement in exceptional circumstances. The court noted that at the time of the High Court’s decision, no arbitrator had been appointed, thus rendering the stay of execution inappropriate. Justice Walia’s judgment highlighted that the High Court found no basis to stay the matter where no arbitration proceedings were pending before an arbitrator.
Debswana’s application to the High Court sought relief to stay the sale in execution, pending the outcome of the arbitration. On June 17, 2024, Justice Phuthego granted Debswana’s application, emphasising the necessity of maintaining the status quo pending the arbitration outcome. Justice Phuthego highlighted the delay in appointing an arbitrator as a critical factor in granting the stay, underscoring the contractual obligation to resolve disputes through arbitration.
The judgment addressed the interpretation of both Justice Motlhabi’s and Justice Walia’s decisions. The court noted that at the time, the matter was not before the arbitrator, but now it is before the arbitrator. This significant change in circumstances was pivotal in Justice Phuthego’s decision to grant the stay, recognising that the previous rulings were interim in nature. Phuthego said, “In my judgment, the order by Motlhabi J, which was confirmed by the Court of Appeal, was interim in nature, and therefore susceptible to alteration by an arbitrator or a court properly seized with the matter, the final decision as to whether or not the DAB’s decision should be upheld lying with the arbitrator. I do not understand the first respondent to contend that the said courts did not have jurisdiction to hear the stay application. The courts themselves did not say so. It appears that they refused to grant the stay of execution of the judgment pending the hearing of the arbitration because there was no evidence that an arbitrator had been appointed. Now the arbitrator has been appointed, which changes the complexion of the matter altogether. To ensure that the arbitrator does not issue an order that is brutum fulmen, the status quo must be maintained.”
The High Court’s decision included several key orders: the usual forms of notice and service were dispensed with, treating the application as one of urgency; the notice of the sale in execution scheduled for July 12, 2024, was declared irregular and set aside; Debswana was ordered to provide a bank guarantee of not less than P50 million within 14 days as security for the judgment debt; and Liftoff Investments was ordered to bear the costs of the application.
