CITY ENGINEERING NIGERIA LTD VS FEDERAL HOUSING AUTHORITY
In the Supreme Court of Nigeria
Thursday, July 17, 1997
Case Number: SC. 204/1992
MUHAMMADU LAWAL UWAIS JUSTICE, SUPREME COURT
SALHU MODIBBO ALFA BELGORE JUSTICE, SUPREME COURT
ABUBAKAR BASHIR WALI JUSTICE, SUPREME COURT
IDRIS LEGBO KUTIGI JUSTICE, SUPREME COURT
MICHAEL EKUNDAYO OGUNDARE JUSTICE, SUPREME COURT
EMMANUEL OBIOMA OGWUEGBU JUSTICE, SUPREME COURT
SYLVESTER UMARU ONU JUSTICE, SUPREME COURT
CITY ENGINEERING NIGERIA LTD
FEDERAL HOUSING AUTHORITY
PERIOD OF LIMITATION
The period of limitation is deemed to run after the date of the award only when a party has by his own contract expressly waived his right to sue as soon as the cause of action has occurred. If there is no such Scott v. Avery clause, the limitation period begins to run immediately. A party is, however, precluded from setting up such an agreement as a defence if he has waived his right to insist on arbitration as a condition precedent.
EFFECT OF SUBMISSION TO ARBITRATION ON JURISDICTION OF COURT
Any agreement to submit a dispute to arbitration, such as the one referred to above, does not oust the jurisdiction of the court. Therefore either party to such an agreement may, before a submission to arbitration or an award is made, commence legal proceedings in respect of any claim or cause of action included in the submission.
OGUNDARE, JSC (Delivering the leading Judgment):
The principal question that calls for determination in this appeal is: When does the statutory period of limitation start to run for the purpose of the enforcement of an arbitration award; is it at the date of the accrual of the original cause to action or is it at the date of the arbitral award?The parties herein entered into a written agreement dated 17th day of December, 1974 whereby the appellant was to build a number of housing units at Festac Town, Badagry Road, Lagos. The agreement contained in its Clause 30 a provision to submit all matters in dispute in connection with the execution of the contract to arbitration. Sub-clause (4) of clause 30 provided that the award of the arbitrator would be final and binding. A dispute arose between the parties in the course of the execution of the contract. The respondent rather than settle the dispute inter partes by its letter dated 5th December 1980 threatened to terminate the contract. In its reaction to this threat, the appellant by its letter dated 10th December 1980 duly notified the respondent and requested its consent to the appointment of an Arbitrator pursuant to clause 30. Rather than give its consent, the respondent by a letter dated 12th December, 1980 terminated the contract. The appellant invoked the arbitration clause in the agreement between them.
The parties eventually went to arbitration presided over by Architect Akinwande Olumide Craig. The arbitration proceedings commenced on 11th December, 1981 and ended in November 1985 when the Arbitrator made his award in the sum of N3,722,118.75 in favour of the appellant. By letter dated 17th August, 1988, the appellants solicitors demanded from the respondent the payment of the said sum. When payment was not forthcoming, the appellant applied, by way of motion on notice, to the High Court of Lagos State pursuant to section 31(3) of the Arbitration and Conciliation Act No.11 of 1988, and/or section 13 of the Arbitration Law Cap. 10 Laws of Lagos State 1973 and Order 40 rule 4 of the High Court of Lagos State Rules, 1974 praying for the following reliefs:
‘(i) That the applicant may have leave to enforce the award made in November, 1985 by Mr. Akinwande Olumide Craig, an architect appointed in the arbitration under the agreement and conditions of contract between the applicant and the respondent dated 17th day of December, 1974 in the same manner as a judgment of the honourable court to the same effect.
(ii) An order that the respondent do pay costs of the application and the arbitration proceedings.
(iii) Interest on the award from 1st December. 1985 at the rate of 13% until the entire amount is paid.
(iv) And for such further order or orders as the Court may make in the circumstances.
The application was supported by an affidavit of 20 paragraphs sworn to by the Managing Director of the Appellant Company. There was no counter-affidavit.
After hearing learned counsel for the parties, the learned trial Judge (Ayorinde J. as he then was) in a reserved ruling delivered on 21st September, 1989 in which he quoted clause 30(1) & (4) of the agreement between the parties, and following Obembe v. Wemabod Estates Ltd. (1977) 5Se. 115 at 129-130, observed:
‘It is clearly shown in the above clause that Scott v. Avery clauses were not incorporated. It follows that the case in hand is one where the applicant ought to sue immediately the breach occurred in 1980. It was left then for the respondent to stay proceeding pending the outcome of the arbitration.
The cause of arbitration arose from 12/12/80. It is also the cause of action. The time limit as agreed by both counsel is 6 years under section 6 of the Limitation Law of Lagos State. The time from 1980 to 1988 is 8 years. On this issue, I agree that time ran out 6 years after 12/12/80.’
The learned Judge next considered the issue raised before him by the respondent that the arbitrator was bound to make his award within 3 months or within any extended time but that as the arbitrator did not extend time as required by law, he was incompetent to make the award. The learned Judge, after quoting the relevant legislation, opined:
‘There is force in the submission of Mr. Ogugen that the arbitrator adjourned the sitting but did not enlarge time in writing. Schedule C is part of section 4 and it could not be ignored. The effect of non-compliance renders the subsequent proceeding null and void. Extension of time or enlargement of time are distinct from adjournment from time to time. The arbitrator was enjoined to complete within 3 months.
Within the first instance he could adjourn as freely as he felt. But after the expiration of the first 3 months, he must specially enlarge time. He could do so as many times as the circumstances arose. He did not do so. The arbitration was not taken within the time stipulated. See Ejifodomis case (supra) at 115’
‘Finally, I hold and find that the cause of action arose in 1980 and time has run out. Secondly, the arbitrator did not enlarge time in writing as required by law to complete within 3 months or extend or enlarge time if he could not complete. He acted outside the jurisdiction. He was functus officio from February 1982. All proceedings thereafter are null and void including the purported award.’ and dismissed the application.
The appellant was dissatisfied with this decision and appealed to the Court of Appeal. In the lead judgment of Sulu-Gambari, JCA, that Court, on the issue of the period of limitation, said:
‘I think there is force in the submission of the learned counsel for the respondent. The present case is one of a simple reference of any dispute to arbitration and contains no clause making an arbitration award a condition precedent to the bringing of an action. The whole purpose of this limitation act, is to apply to persons who have good causes of action which they could, if so disposed, enforce, and to deprive them of the power of enforcing them after having lain by for the number of years respectively and omitted to enforce same, they are thus deprived of the remedy which they have omitted to use.
I think it is obvious that the Act cannot apply to a cause of action which the person entitled to it cannot, because of his own contract, enforce against anyone. I therefore agree with the decision of the learned trial judge that the time limit as agreed by both parties is six years under order 6 of Limitation Law of Lagos State and the time has ran out.’
On the issue of the competence of the Arbitrator, Sulu-Gambari, JCA held:
‘On the whole, without being persuaded by any authority to the contrary and I myself having searched and found none, I come to the conclusion that when the order was made in November, 1985, the arbitrator was giving such order outside the statutory period of three months. By that time, he was definitely functus officio and his order is therefore invalid and must be so pronounced.’
On these two issues the Court below, per Sulu-Gambari JCA, adjudged:
‘On the whole, I agree that the learned trial judge was perfectly right in holding that the action was statute barred on two grounds. namely, (i) that six years had elapsed before the action to enforce the arbitration award was instituted; and (ii) the arbitration proceedings exceeded beyond three months before completion where the arbitrator did not extend it in writing signed by him.’
The appeal was dismissed.
The appellant has now further appealed to this Court. And in its brief argument, it formulates the following questions as arising for determination in the appeal, to wit:
‘(1) Can the statutory period of 3 months as provided for in paragraph C of Schedule 6 Section 4 of Law of Arbitration Cap 10 Laws of Lagos State for the making of an award in arbitration proceedings be waived by the conduct of any party to the proceedings without express written extention of the period by the arbitrator.
(2) In arbitration proceedings where an award has been made which does the period of limitation begin to run for the enforcement of the award is it when the cause of action accrued or at the time of making an award?
(3) Is the claim for interest maintainable in proceedings for the enforcement of the award.
(4) Is the contract from which; the arbitration proceeding, arose under seal or an ordinary contract which the appellant contends is a contract under seal which attracts a statutory limitation period of 12 years? This is a new point which with the leave of the Supreme Court be taken on this Appeal.’
I must, at this stage, remark that Question 4 does not any longer arise for determination as it was abandoned by the appellant. Indeed, it did not arise from the judgments of the two courts below.
This appeal was first heard before a panel of five justices. At the conclusion of that hearing, but before judgment, the Court observed that there are conflicting decisions of this Court on Question (2) above. That hearing was then aborted and a Full Court was empanelled to resolve the conflict pursuant to rule 4 of the Supreme Court (Bench and Division) Rules, Cap. 62. Learned counsel for the parties were invited to file supplementary briefs in respect of the decisions said to be in conflict. Supplementary briefs were accordingly filed. The said decisions are:
1. Murmansk State Steamship Line v. Kano Oil Millers Ltd. (1974) 12 SC 1 where this Court held that the statutory period of limitation should run from the date of the breach of the charter party in 1964 when the ’cause of arbitration’ arose, and not from the date when the award was made in 1966:
2. Obi Obembe v. Wemabod Estates Ltd. (1977)5 SC. 115 where this Court discussed the different types of arbitration clauses; and
3. Kano State Urban Dev. Board v. Fanz Construction Co. Ltd. (1990) 4 NWLR (Pt. 142) 1 where this Court considered the application of sections 5 and 13 of the Arbitration Law of Northern Nigeria.
At the oral hearing, Mr. Seyi Sowemimo appeared for the appellant and proffered oral submissions. The respondent was not represented by counsel and pursuant to the rules of this court the appeal was taken as argued in respondents main and supplementary briefs.
In view of the importance of Question 2 to the determination of this appeal, I shall consider it first:
It is not in dispute that-
(i) the agreement entered into by the parties on 17/12/74 contained clause 30, sub-clauses (I) and (4) of which read:
’30(1) Provided always that in case any dispute or difference shall arise between the employer or his representative on his behalf and the contractor, either during the progress or after completion or abandonment of the works, as to the construction of this contract or as to any matter or thing of whatsoever nature arising hereunder or in connection therewith (including any matter or anything left by this contract to the discretion of the employer or the deferment or adjustment by the employer of any such appointment to which the contractor may claim to be entitled) then such dispute or difference shall be and is hereby referred to the arbitration and final decision of a person to be agreed between the parties, or failing agreement within 14 days after either party has given to the other a written request to concur in the appointment of an arbitrator, a person to be appointed on the request of either party by the President of the Nigerian Institute of Architects.
(4) The award of such arbitrator shall be final and binding on the parties.
(ii) that this agreement was unilaterally terminated by the respondent on 12/12/80; .
(iii) that the appellant invoked the arbitration clause 30;
(iv) that Architect Akinwande Olumide Craig was appointed Arbitrator and he conducted an arbitration between the parties.
(v) that the arbitrator made, and published, his award in November 1985 in the sum of N3,722,118.75 in favour of the appellant;
(vi) that the appellant applied to the High Court of Lagos State in 1988 to enforce the award;
(vii) the arbitration agreement of 17/12/74 did not contain a Scott v. Avery clause.
Now Section 8 (1) (d) of the Limitation Law, Cap 70 Laws of Lagos State
‘8(1) The following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued –
(d) action to enforce an arbitration award, where the arbitration agreement is not under seal or where the arbitration is under any enactment other than the arbitration law;’
It is generally accepted for the purpose of these proceedings that the arbitration agreement of 17/12/74 was not under seal nor was it under any enactment other than the Arbitration Law. It is thus accepted that the limitation period applicable to it is six years. The only dispute is as to the date the limitation period began to run. Was it 12/12/80 when the respondent terminated the agreement and appellants cause of action arose or November 1985 when the arbitrator made and published his award?
It is appellants contention both in this court and in the two Courts below, that time started to run from November 1985 when the arbitral award was made. It is submitted that as the application to enforce it was brought in 1988, it was not statute-barred as the application was brought within the statutory period of six years. Support for the argument is found in Kano State Urban Dev. Board v. Fanz Construction Co. (supra) at page 37 where it was held by Agbaje, JSC. that an award by an arbitrator constitutes an independent cause of action. After referring in his supplementary brief to various dicta in that case and in Mumansk (supra) at pp4-9 and Obembe v. Wemabod Estates Ltd (1977) 5SC. 115 at 129-130, Mr. Sowemimo, learned counsel for the appellant submitted:
‘The above extracts from these three decisions no doubt reveal some conflict in the mode of computation of time in relation to the statutory period of limitation, In resolving this conflict, this Honourable Court is respectively urged to uphold its later decision in KSUDB v. Fanz Construction and overruled its earlier decisions in Obembe V. Wemabod Estate and Kano Oil Millers cases.
It is submitted that the latter decision in KSUDB v. Fanz Construction is to be preferred as it is more in consonance with well established principles of law and provides greater access to the courts.
It is respectively submitted that in reaching the dec
S. Sowemimo -for the Appellant