INTRA ENGINEERING AND TURNKEY LIMITED v. SINOMACHINARY INTERNATIONAL LIMITED
(2019)LCN/13250(CA)
In The Court of Appeal of Nigeria
On Tuesday, the 14th day of May, 2019
CA/A/283/2018
RATIO
CONTRACT: PARTIES ARE BOUND TO ANY WRITTEN CONTRACT THEY ENTER INTO
It is trite law that parties to a written contract are bound by the terms of a contract which they freely enter into provided those terms are not illegal or contrary to public policy. See COLONIAL DEVELOPMENT BOARD VS. KAMSON (1955) 21 NLR 206; UNION BANK OF NIGERIA PLC VS. OZIGI (1994) 3 NWLR (PART 333) 385; CHUKWUOKEKE VS. NIGERIA AGRICULTURAL CO-OP & RURAL DEVT BANK LTD & ORS (2018) LPELR 45037 (CA).
CONTRACTS: CONTRACTS THAT REFER TO ARBITRATION MUST BE ADHERED TO
In OGUN STATE HOUSING CORPORATION VS. ENGINEER OLU OGUNSOLA (2000) 14 NWLR (Pt. 687) 431, the Court of Appeal held:
“It is also a settled principal of law that where an agreement which is made and signed by parties stipulates that disputes arising from that contract should first be referred to arbitration it would amount to jumping the queue or putting the carts before the horse for any of the parties to resolve to go to the Court first before the dispute between the parties is referred to arbitration as provided in the agreement to which the parties are mutually bound.”
However, Section 5 (1) and (2) of the Arbitration and Conciliation Act, is to the effect that:
1, If any party to an arbitration agreement commences any action in any court with respect to any matter which is the subject of an arbitration agreement any party to the arbitration agreement may, at any time after appearance and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings,
2. A Court to which an application is made under subsection (1) of this section may, if it is satisfied-
a) that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the arbitration agreement; and
b) that the applicant was at the time when the action was commenced and still remains ready and willing to do all things necessary to the proper conduct of the arbitration, make an order staying the proceedings.
This Section has been interpreted by a plethora of cases and the courts have found that the two conditions to be satisfied under this section are: (1) that the defendant has taken no steps in the proceedings, and (2) that it was and still remains ready and willing to do all things necessary to the proper conduct of the arbitration.
In N. P. M. CO. LTD VS. COMPAGNIE NOGA D’ IMPORTATAION (1971) NSCC 266 the question was whether the appearance of a defendant and his acquiescence in making of an order to which he ought to have objected can be said to be a step in proceedings sufficient to debar him from applying for a stay of proceedings in order to refer the matter to arbitration, under Section 5 of Arbitration Act. The Supreme Court Per Lewis, JSC held:
“…the issue must therefore be whether the appearance of counsel and his silence in the circumstance can be taken to be a step in the proceedings.
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COUNTRY THEATRES & HOTELS LLD V KNOWLES (1902) 1 KB. 480; (1902)71 L.J.K.B 351 shows that acquiescence by the defendant in the making of an order to which he might have objected can be said to be a step in the proceedings.”
In concluding this judgement Lewis, JSC stated decided that:
“it follows that in our view the defendant’s counsel was not solely appearing here in answer to the writ filed but could here have raised immediately, when the Judge ordered that the defendants do file a statement of defence within 30 days of receiving the statement of claim, objection to being so ordered as he wishes to file an application to stay the proceedings in order that they be referred to arbitration.”
This decision is in line with OBEMBE VS. WEMABOD ESTATE (1977) LPELR ? 2161 (SC) where the Supreme Court Per Fatayi-Willams, JSC held:
“A party who makes any application whatsoever to the court, even though it be merely an application for extension of time, takes a step in the proceedings, Delivery of a statement of defence is also a step in the proceedings”.
?Moreover, the Appellant conceded to the fact that an Arbitration Clause does not
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automatically rob the court of jurisdiction in paragraph E13 of its brief of argument albeit the Appellant did state that an aggrieved member cannot jump over the forum for the primary adjudication of the breach by coming direct to the Court.
The Supreme Court in relation to the principle that Arbitration Clause does not automatically rob the court of jurisdiction held in CITY ENGINEERING NIGERIA LTD VS. FEDERAL HOUSING AUTHORITY (1997) LPELR-868(SC) that:
“As we have pointed out earlier, 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 (See HARRIS V. REYNOLDS (1845) 7 (Q.B. 71). At common law, the court has no jurisdiction to stay such proceedings: Where, however, there is provision in the agreement, as in Exhibit 3, for submission to arbitration, the court has jurisdiction to stay proceedings by virtue of its powers under section 5 of the Arbitration Act”
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The decision above was re-echoed by the Court of Appeal in SCOA (NIG) PLC VS. STERLING BANK PLC (2016) LPELR ? 40566 (CA) where it held that:
?It is also trite law that any agreement to submit a dispute to arbitration does not oust the jurisdiction of the Court See OBEMBE VS WEMABOD ESTATES LTD (1977) 5 SC 70, The jurisdiction of the Court can only be ousted based on certain qualifications as provided in the Arbitration and Conciliation Act In the instant case Section 5 of the Arbitration and Conciliation Act provides that: – If any party to an arbitration commences any action in any Court with respect to any matter which is the subject of an arbitration agreement, any party to the arbitration agreement may at any time after appearance and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay proceedings.”
The time for the application for the stay of proceedings was explained in a recent Court of Appeal decision of FEDERAL MINISTRY OF HEALTH & ORS VS. DASCON NIGERIA LIMITED (2017) LPELR ? 43621 (CA) where the Court held:
“When parties enter into agreement and there is an
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arbitration clause whereby the parties must first go for arbitration, the defendant in a case where the other party has filed a suit should ask for a stay of proceedings pending arbitration. That does not amount to a submission to trial See FAWEHINMI CONSTRUCTION COMPANY LTD V.O.A.U (1998) LPELR 1256 SC PER BELGORE JSC. Where a defendant fails to raise the issue of arbitration clause and rely on same at the early stage of the proceeding but rather takes positive step in the action, he would be deemed to have waived his right under the arbitration clause. An application for stay of proceedings pending arbitration should be made in time as provided by Section 5 of the Arbitration and Conciliation Act.”
?Furthermore, the Court held that
“the position of the law is that an arbitration clause in agreements generally does not oust the jurisdiction of court or prevent the parties form having recourse to the court in respect of dispute arising therefrom. A party to an agreement with an arbitration clause has the option to either submit to arbitration or to have the dispute decided by the court. The choice of arbitration does not bar resort to the Court to
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obtain security for any eventual award.”
In the light of all the authorities above, the Appellant in the lower court did not file a motion to stay the proceedings in order to refer it to arbitration but rather filed a Notice of Intention to Defend which means the Appellant rightly waived that right to arbitrate.
In relation to the Appellant’s argument regarding Practice Direction in Re- Arbitration Clause in Commercial Contracts Ref No. CiNiP. DA/01.1/001 dated the 24th day of May 2017 and issued by the Chief Justice of Nigeria, the Supreme Court in the case of AFRIBANK (NIG) PLC VS, AKWARA (2006) LPELR ? 199 (SC) answered this question . The Apex Court held:
“A Practice Direction made by the Chief Justice of Nigeria under Order 10 rule 2 which will be regarded as a rule, will also be subject to the interpretation of the Supreme Court, like any other order or rule of the Court. Order 10 Rule 2 provides as follows: “The Chief Justice may, at any time, by notice declare a practice of the court as a Practice Direction, and whenever so declared, such Practice Direction shall be regarded as part of these Rules,” It is the above rule that vests
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in the Chief Justice of Nigeria the power to declare a Practice Direction, which relevantly is traced or traceable to Order 6 rule 5 of the Supreme Court Rules. The rule is not open ended,”
However, the same Supreme Court in OKEREKE VS. YAR’ADUA. & ORS (2008) LPELR ? 2446 (SC) has he
?Practice Directions do not, strictly speaking, qualify as Statutes or enactments. They do not even stand on equal footing with Rules of Court. They are ancillary to and therefore subordinate to Rules of Court. Consequently, in the event of a conflict between a Rule of Court and a the Arbitration and Practice Direction the rule must prevail.”
In view of the cases above Section 5 of the Arbitration and Conciliation Act which is to the effect that the Appellant must file a stay of proceedings before taking any fresh steps prevails over the practice direction.
On the issue of clause 20 of the sales Contract which reads:
“This Contract is governed by and shall be construed in accordance with the laws of the People China.”
The law relating to cases where the parties have agreed that a foreign law will govern the agreement but one of the
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parties institutes an action in Nigeria was tackled in SONNAR (NIG’) LTD & ANOR.VS. PARTENREEDRI M’ S’ NORDWIND & ANOR (1987) 4 NWLR (PT’ 66) 520, (1987) ALL NLR 548. In this case the Supreme Court applied the test set out by Brandon J in the “ELEFTHERIA? (1969) 1 LLOYDS L. R. 237 which states: ?(1) where plaintiffs sue in England in breach of an agreement to refer dispute to a foreign court, and the defendants apply for a stay, the English court, assuming the claim to be otherwise within the jurisdiction, is not bound to grant a stay, but has a discretion whether to do or not? Oputa JSC in the Supreme court case held:? Our courts should not be too eager to divest themselves of jurisdiction conferred on the by the constitution and by other laws simply because parties in their private contracts chose a foreign forum and foreign law. Courts guards rather jealously their jurisdiction and even where there is an ouster of that jurisdiction by statute it should be by clear and unequivocal words. If that is so, as indeed it is, how much less can parties by their private acts remove the jurisdiction properly and
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legally vested in our courts? Our Courts should be in charge of their own proceedings. When it is said that parties make their own contracts and that the courts will only give effect to their intentions as expressed in and by their contract, which should generally be understood to mean and imply a contract which does not rob the courts of its jurisdiction in favour of another foreign forum.”
The Court of Appeal relying on this case in a similar case of LIGNES AERIENNES CONGOLAISES (L. A. C.) v. AIR ATLANTIC NIGERIA LIMITED (A. A. N.) (2005) LPELR-5808(CA) per Ogunbiyi JCA added that:
“from all indications, where the issue before the trial Judge is whether he should decline jurisdiction or not because of the prior agreement, he has discretion. There is also onus on the party urging the court to exercise the discretion, in his favour by not declining jurisdiction, to provide sufficient evidence to justify such grant. The circumstances which would therefore assist the judge in reaching a decision one way or another have been set down in what are referred to as the Brandon Tests which are enunciated by Brandon J. in THE ELEFTHERIA (1969) 1 LLOYDS’ LR 237
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AT P. 242. The tests which therefore included the following: 1) whether the law of the foreign court applies and if so, whether it differs from Nigerian law in any material respects. 2) whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. 3) whether the plaintiffs would be prejudiced by having to sue in the foreign country.”
Justice Ogunbiyi JCA went further stating that:
“It is also conceded that when the intention of parties to a contract, as to the law governing the contract, is expressed in words, this certainly expressed intention in general and as a general rule determines the proper law of the contract. For this to be effective however, the choice of the law must be bona fide, legal and reasonable. In other words, it should not be capricious and absurd, but clearly identifiable and clear cut.”
?F
