Subrogation is a legal doctrine in which a party assumes the rights and responsibilities of another party. It is mostly used in relation to a debt or obligation. The doctrine is part of insurance law, was established during the 18th Century, and was imported into South African law through the case of Ackerman v Loubser 1918 OPD 31.
Within the Botswana jurisdiction, subrogation is governed by common law principleS and is recognized as a valid method for transferring rights and obligations.
Subrogation is also utilized in insurance matters as it allows an insurance company the opportunity to step into the shoes of the insured to recover monies for a loss from a third party who is responsible for the loss.
In the ordinary cause, and in most instances, the doctrine of subrogation is used if an insurance company indemnifies/pays a claim for a loss that was caused by a third party. The insurance company thereon has the right to pursue the third party for reimbursement of the claim amount.
It is important to note that subrogation rights in Botswana are subject to the terms and conditions of the specific insurance policy. Some policies may exclude or limit subrogation rights, so it is important for policyholders to carefully review their policy and understand the scope of their subrogation rights.
In the Botswana Court of Appeal Case of OLIVIA BALESENG V KENNETH MOSELE & ANOTHER [CACGB-023-18] [Unreported], the Appellate court found that subrogation however has no effect on the substantive rights and obligations of the parties. The court held that an insured, who has been indemnified by an insurer, whether fully or in part, is entitled to pursue the original cause of action against the wrongdoer for the full loss.
The court held that am indemnification payment by the insurer does not affect the insured’s right or capacity to bring an action or to appear in a court (also termed as locus standi.)
Therefore, parties must be aware that they are is a likelihood of being sued by an insured party even after indemnification from the insurance company via subrogation.
This article is only intended to be a very high-level overview of some of the differences between litigation and arbitration. It is not intended to cover all of the differences, nor is it intended to provide legal advice.
The fundamental difference between litigation and Arbitration is the forum.
Litigation is conducted in the Courts and is generally presided over by a Judge. In arbitration proceedings, the parties either agree the person who will act as Arbitrator or agree a mechanism by which the Arbitrator will be appointed.
In many commercial agreements, the parties pre-agree to have any disputes which arise between them resolved by Arbitration, and there is a growing trend to include a referral to arbitration in commercial agreements, when these are drafted.
The reasons for parties often preferring to resolve disputes through arbitration are that:
The parties are at liberty to choose their Arbitrator, which is especially advantageous when the dispute involves a question where an expert in a particular field might have better knowledge in that particular field than a judge;
Arbitration proceedings are not open to the public and the details of the dispute therefore remain private;
Arbitration proceedings are generally (but not always) completed faster than litigation proceedings;
The parties are at liberty to choose whether the arbitration proceedings will be conducted formally, or informally, and are at liberty to choose the rules which will govern the proceedings.
Where formal arbitration proceedings are held, the procedure is very similar to that of litigation. The parties exchange Submissions (the Pleadings in litigation) which set out the nature of the claim or defence, as the case may be. Pre-arbitration meetings are held with the Arbitrator in order to regulate the proceedings and the issues to be decided (similar to Case Management Conferences in the High Court); and the dispute(s) to be decided by the Arbitrator may or may not require the leading of evidence through witnesses in the same manner as matters which go to litigation.
There are, however, some fundamental differences between litigation and arbitration. The most important of these are:
The Arbitration Act requires that there must be a “submission to arbitration” which requires a written agreement between the parties to refer the dispute(s) to Arbitration;
Generally, an Arbitration Award is final and binding on the parties, and is usually not subject to an Appeal;
The parties are jointly and severally liable to pay the fees of the person appointed as the Arbitrator;
The basis upon which the Courts can intervene in Arbitration proceedings, or an Arbitrator’s Award can be reviewed and set aside by the Courts, is very limited.
In the event that the parties pre-agree to arbitrate disputes, such as when they agree in a written contract to refer any and all disputes to Arbitration, then they are generally bound by that agreement and may not choose to litigate instead.
Section 6 of the Arbitration Act gives the High Court the power to stay any proceedings commenced in a court where the parties have agreed to refer any dispute to Arbitration. Any party wishing to stay the court proceedings must make application to the High Court for a stay of proceedings pending the outcome of the Arbitration.
Where the parties have agreed to refer disputes to arbitration, the court will usually stay any legal proceedings commenced in court and will generally require the matter to be determined by arbitration.
In the case of in BM Packaging (Pty) Limited v. PPC Botswana (Pty) Limited [1998] BLR 309 HC, the court held that once it is satisfied that a dispute falls within the ambit of an arbitration agreement, the court will require the dispute to be submitted to arbitration and will stay the action before the court, pending the delivery of the Award by the Arbitrator. The court stated that it would require a strong reason to refuse exercising its discretion to enforce the operation of the arbitration agreement. This decision has been followed in numerous other Judgments of the High Court.
That having been said, in the case of Fencing Centre (Pty) Limited v. Murray & Roberts Construction [2002] (2) BLR 269 HC, the Court held that the existence, or otherwise, of an arbitration agreement between the parties (a submission to arbitration) is a matter of interpretation and is an issue solely for determination by the court.
The courts have the power to assist arbitral proceedings and have various powers to order interim measures, as provided by section 16 of the Arbitration Act. These powers include ordering security for costs, ordering document discovery, preserving the subject matter of the arbitration and issuing subpoenas.
Every so often, it happens that one party (having agreed to arbitrate a dispute) is dissatisfied with the result and because (generally) there is no right to appeal an Arbitrator’s Award, the dissatisfied party seeks the intervention of the Court to try and set aside the decision or Award.
There are very limited grounds on which an Arbitral Award can be reviewed and set aside in Botswana. Section 13 of the Arbitration Act limits the grounds on which an Arbitral Award will be set aside to the grounds of (i) where the Arbitrator has misconducted the proceedings; or (ii) where the Award has been improperly procured.
Arbitration Awards are recoginised by the Botswana Courts and may be made an Order of a Court of competent jurisdiction and then enforced in the same way as a Judgment. Section 20 of the Arbitration Act provides that ‘[a]n award on a submission may, by leave of the Court or a judge thereof, be enforced in the same manner as a judgment or order to the same effect, and where leave is so given, judgment may be entered in terms of the award.’
In summary, unless the parties have pre-agreed to resolve disputes by Arbitration, the decision on whether to litigate or arbitrate is a matter or personal choice. Where, however, the subject matter of the dispute involves a highly technical or specialized field or where the parties require their dispute to be resolved quickly and informally, arbitration proceedings will generally be preferred.
1. When companies are placed under liquidation, it is ordinarily on the basis that the company is insolvent, in that, it can no longer meet its financial obligations to its creditors.
2. However, for some insolvent companies, there are several other factors which have contributed to the company’s undoing, such as mismanagement of the company or acts of misconduct or impropriety by those in control of the company’s affairs which may well have led to its current financial predicament, to the prejudice of its creditors.
3. These factors are mostly prevalent in many corporate failures and/or scandals that have occurred globally. Botswana is no exception.
4. It is for this reason that the legislature has made provisions for an insolvency enquiry which is governed under section 430 and 431 of the Companies Act CAP 42:01 (“the Act”), to be held for the benefit of the creditors of an insolvent estate.
5. The purpose of an insolvency enquiry is to provide for a fact-finding mechanism for a Liquidator of a company and/or its creditors to investigate the affairs of the insolvent company and to also to obtain the necessary information and details from relevant parties to assist them in properly winding up the affairs of the company.
6. This is important because relevant parties such as directors may have concealed important information which could assist the Liquidator of a company in determining the contributing factor to the insolvency of the company and whether there are other transactions which may be salvaged for the benefit of the creditors.
7. The Liquidator would therefore, after having observed or discovered that there is impropriety relating to the conduct of the company’s business or its formation, recommend to the creditors that an insolvency enquiry should be held.
8. The creditors would then pass a resolution, at a creditor’s meeting, that an insolvency enquiry ought to take place.
9. The Master who presides at any meeting of creditors (under the advice of the Liquidator of the insolvent company) may then, in terms of Section 430(3) of the Act, summon any person to an insolvency enquiry:
• who is known or, on reasonable grounds, believed to be in possession of any property which belongs or belonged to the company or to be indebted to the company; or
• who in the opinion of the Master may be able to give any material information concerning the company or its affairs, whether before or after the commencement of liquidation for purposes of being interrogated by the Liquidator or creditors who have proved their claim in the insolvent estate.
10. Persons who are summoned to an insolvency enquiry are mandated in terms of section 430(4) of the Act, to provide any documents or books pertaining to the affairs of the insolvent company which are believed to be under his or her control.
11. It is important to note that section 431(4) of the Act stipulates that any evidence given at an insolvency enquiry shall be admissible in any civil proceedings instituted against the summoned person who gave evidence.
12. Further, persons who are summoned to an insolvency enquiry for interrogation have the right to be represented by an accountant or by an attorney with or without counsel and shall be (other than the directors or other officers of the company) entitled to such witness fees, to be paid out of the funds of the insolvent company, as he would be entitled to if he were a witness in any civil proceedings in a magistrate’s court.
13. Directors and other officers of the company are only entitled to such witness fees or expenses in connection with such attendance subject to the approval of the Master of the High Court.
14. Due to the serious nature of an insolvency enquiry, section 431(8) of the Act provides that any person summoned for interrogation who refuses, on any ground other than that the answer may tend to incriminate him, to answer any question (except any question which the presiding officer may see fit to disallow) put to him, shall be guilty of contempt of court.
15. However, section 431(9) of the Act provides that a person is not excused from answering a question in the course of being examined on the ground that the answer may incriminate or tend to incriminate that person.
16. Notwithstanding that a person may not be excused from answering a question on the ground that it may incriminate him, section 431(10) affords protection to the witness in that the testimony of a witness who has been interrogated is not admissible as evidence in criminal proceedings against that person, except on a charge of perjury in relation to that testimony.
17. The Act further sets out punitive measures in an insolvency enquiry in that, persons summoned by the Master or other officer who fail without a valid excuse to attend any meeting to which he has been so summoned or to produce any book or document or extract from any book or document in his possession, custody or control-shall be guilty of contempt of court and liable to a fine not exceeding BWP1,000 or to imprisonment for a term not exceeding 12 months or to both.
18. After the conclusion of the insolvency enquiry, the Liquidator, together with the creditors, having obtained the necessary information from the summoned persons, would have to now consider at a creditors’ meeting whether to institute civil proceedings against the directors or any other relevant persons who were involved in the management of the company for either reckless trading, fraudulent conduct or transactions which were made without value, in the hope of recovering funds for the benefit of the creditors.
19. For more information on the above, please contact Ada at ada@armstrongs.bw or call +267 395 3481.
1. The Financial Reporting Act (“Act”) was passed by the Parliament of Botswana on the 1st of April 2011. It provides a legal framework through the Botswana Oversight Authority (“BAOA”) for oversight of public interest entities.
2. According to the Act, a “public interest entity” is defined as:
2.1. Any entity that has issued equity or debt securities for public subscription and is listed on a stock exchange.
2.2. Any bank, deposit-taking institution, or other institution supervised by the Bank of Botswana.
2.3. Any insurance company, pension and provident fund, collective investment undertaking, or other institution supervised by the Non-Bank Financial Institutions Regulatory Authority.
2.4. Any entity where any two of the following conditions exceed amounts or numbers prescribed by the Minister in the Regulations:
2.4.1. Annual revenue,
2.4.2. Number of employees,
2.4.3. Total assets, or
2.4.4. Total liabilities, excluding shareholder’s equity, as of the end of the preceding accounting year.
2.5. Any partly or wholly funded public body.
3. Using his powers under Section 71 of the Act, the Minister introduced the first set of Financial Reporting (Public Interest Entities) Regulations, which took effect on the 15th of January 2016. These regulations set thresholds as:
3.1. An annual revenue of P300 million.
3.2. 200 employees.
3.3. Total assets of P200 million.
3.4. Total liabilities of P100 million, excluding shareholder’s equity.
4. These thresholds were subsequently revised by the amended Financial Reporting Regulations (“Regulations”), effective from the 1st of April 2022. The new thresholds are:
4.1. An annual revenue of P200 million.
4.2. 150 employees.
4.3. Total assets of P150 million.
4.4. Total liabilities of P50 million, excluding shareholder’s equity.
5. These new Regulations broaden the definition of public interest entities to include more businesses due to the reduced thresholds:
5.1. The revenue threshold was lowered to P200 million.
5.2. The employee count was reduced to 150.
5.3. The asset threshold was decreased to P150 million.
5.4. The liability threshold was dropped to P50 million.
6. If your business meets any two of the aforementioned thresholds, it qualifies as a public interest entity. Under Regulation 4 of the Regulations, such an entity must register as a public interest entity.
7. Once the BAOA approves a registration application, they will issue a registration certificate valid for one year, renewable before the 1st of January annually.
8. After registration, public interest entities must adhere to two primary obligations.
9. The first obligation requires notifying the BAOA upon appointing new directors, managers, or auditors to maintain an updated register as per Section 23 of the Act.
10. This obligation is clear and unequivocal.
11. The second obligation, according to Section 56(5) of the Act, states: “Where a public interest entity or other entity files any annual financial statement or report with a Government department or Authority, the entity shall also file a copy of the financial statement and report with the Authority, following the rules.”
12. Essentially, if a business must submit financial statements to a government department by law, they must also submit them to the BAOA.
13. This mandate necessitates reviewing the licensing under which one’s business operates. If there’s no obligation to file financial statements or reports with a regulator, there’s no need to submit them to the BAOA.
14. Additionally, the Regulations mandate auditors to seek evidence of BAOA registration before auditing a public interest entity. If an entity cannot provide evidence, the audit is postponed until they produce a registration certificate.
15. Notably, under Regulation 21 of the Regulations, if a public interest entity, board member, or employee breaches the Act or Authority rules, the BAOA may impose a fine not exceeding P500,000.
16. Lastly, we acknowledge that the BAOA is drafting the Pula Code of Corporate Governance, which will be obligatory for public interest entities once enacted. The draft can be viewed here: Invitation for Comments – Botswana Code Of Corporate Governance – BAOA.
17. Apart from the above, we see no other significant considerations for businesses recently classified as public interest entities, as detailed in paragraph 4.
As part of Armstrongs’ continuous commitment to ensuring its international footprint worldwide, the Armstrongs Labour and Employment Law Department is proud to have two of our team members as active members of the African Labour Law Society.
Partner, Moemedi Tafa is currently the Botswana representative in the Society and is also a member of the Management Committee. Associate, Thato Batisani, is now an active member of the society and will be participating and, assisting in facilitating the 5th African Labour Law Society Conference to be held in Mauritius between the 29th and 30th of March 2023. Join Thato and others from across the continent for this great opportunity to interact and broaden your knowledge of labour law in this day and age.
