MISR (NIGERIA) LTD (APPELLANTS)

v.

SALAH EL ASSAD (RESPONDENT)

(1971) All N.L.R. 175

Division: Federal Supreme Court

Date of Judgment: 21st May, 1971

Case Number: SUIT NO. S.C. 2/1970

Before: Coker, Udoma, Sowemimo, JJ.S.C.

Appeal from the High Court (Lagos).

HELD:

(1)     It would be asking too much of any court to sanction an unwarranted departure from the terms of a contract into which two free and able parties entered unless such a contract or any part of it had been lawfully abrogated. Despite the observations of the trial Judge the clause still remained the contract of the parties and the ordinary rules of law relating to contracts must apply.

(2)     The Supreme Court, therefore, could not accede to the argument of Counsel for the plaintiffs that even though the clause remained in the contract, yet the court could treat the clause as unenforceable and therefore discountenance it in the enforcement of rights under the contract.

Appeal allowed: Ruling of High Court set aside: Plaintiff's action stayed indefinitely in accordance with s. 5 of Arbitration Act.

Case referred to:

Cameron v. Cuddy and anor. (1914) A.C. 651.

Act referred to:

Arbitration Act, Cap. 13 (Laws of the Federation of Nigeria) s.5, 6.

Rules and Orders cited:

Rules of the Supreme Court, Order 7 rule 13.

APPEAL from the High Court (Lagos).

SUIT NO. S.C. 2/1970.

Chief Williams (with him, Olorunnimbe, and Dosunmu) for the Appellants.

Chief Coker (with him, Agu) for the Respondent.

Coker, J.S.C. (delivering the judgment of the court):-Messrs Misr (Nigeria) Ltd., have appealed against the judgment of the High Court, Lagos (Caxton-Martins, J.) which was entered with costs in favour of one Sallah El Assad, trading under the name and style of Swiss West African Trading Agency, the plaintiff therein, in the terms of the writ which reads as follows:-

"The plaintiffs' claim against the defendant is for the sum of £20,000 (twenty thousand pounds) due to the plaintiff and payable by the defendant being damages for breach of contract to buy 3000 tons of No. 1 heavy melting steel scrap from the plaintiff within the date mentioned in the agreement dated 20th day of July, 1962."

The defendant has refused, failed and/or neglected, to pay in spite of repeated demands."

Learned Counsel for the respondents before us has also filed a notice, pursuant to the provisions of O. 7, r. 13 of the Rules of this Court, to the effect that the ruling of the High Court be affirmed on the following other ground that is to say:-

"That since there has been an abortive arbitration the court has the duty to come to the assistance of the parties by removing the impasse and the extrication of their rights, by entertaining the suit, since the parties were unable to agree on the appointment of arbitrators acceptable to both parties."

As would have been apparent the action itself concerns the outcome of arbitration proceedings. After the filing of the action and the service of the writ of summons on the defendants, they took out a motion in the High Court Lagos, asking that the action be stayed indefinitely pursuant to the provisions of section 5 of the Arbitration Act, Cap. 13 (Laws of the Federation of Nigeria) because, as stated in the defendant's affidavit in support of the motion, the parties have "by submission in writing dated the 20th day of July, 1962 agreed to refer to arbitration the matters in respect of which this action is brought..." The application was supported by an affidavit carrying as an exhibit thereto a copy of the submission to which reference was being made. The last clause in that submission provides and reads as follows:-

"In the case of disagreement, the two parties will agree to nominate arbitrators who will decide, in the case of arbitrators not reaching an agreement, they will nominate an umpire whose decision will be final and binding."

The plaintiff thereafter filed a counter-affidavit paragraphs 2 and 3 of which read as follows:-

"2.     An award of £6,993-0s-6d with 70 guineas cost was made in my favour on the 1st day of July, 1968 by Mr T.K. Agbesanwa as a result of an arbitration of which the defendant had notice...

3.      The said award was set aside on the 21st day of October, 1968 in suit No. M/145/68... I make this oath solemnly and conscientiously believing same to be true."

Now it is true that an award dated the 20th day of July, 1962 was made in favour of the plaintiff by one Mr Timothy K. Agbesanwa, a sole arbitrator. It is also true that by a ruling of the 21st October, 1968 in Suit No. M/145/68 the High Court of Lagos (Lambo J.) set aside that award. In the course of the ruling in that matter, Lambo J. stated as follows:-

"It would appear that the whole case revolved round the question whether or not T.K. Agbesanwa Esquire, was validly appointed in pursuance of the arbitration agreement exhibit A made in July, 1962. After due consideration of the arguments and the affidavits sworn to by the parties, I am of the opinion that the appointment of the sole arbitrator Mr T.K. Agbesanwa was not made by the respondent in accordance with the agreement of July, 1962, exhibit "A". Accordingly, I hold that the appointment was a nullity and it is hereby ordered that the award be set aside. The respondent will pay the costs of this application which I assess and fix at 10 guineas."

Apparently, after this, the plaintiffs had sought by way of an originating summons the aid of the court pursuant to section 6 of the Arbitration Act, Cap. 13 "to appoint an arbitrator." The High Court, Lagos (George J.) ruled that the court had no jurisdiction to do this and so struck out his application.

However the motion to stay the proceedings indefinitely was moved and argued. It was opposed by learned Counsel for the plaintiff who contended that there had already been an abortive arbitration, that the plaintiff had unsuccessfully sought the assistance of the court to appoint an arbitrator, and that in the circumstances the plaintiff was entitled to proceed with his case by way of a writ as he had now done. In a reserved ruling Caxton-Martins J. refused the application for a stay of proceedings and observed as follows:-

"The fallacy in the contention of the defendants/applicants arises in an attempt to import into the arbitration clause more than one arbitration. In my opinion, the exhibit (Saki) does not provide for more than one arbitration; one arbitration had already taken place and the parties had reached the stage when they are entitled to bring their matter before the court. The motion is accordingly struck out."

After striking out the motion to stay the proceedings, indefinitely, the learned trial Judge ordered that pleadings should be filed by the parties giving the plaintiffs 15 days within which to file their statement of claim and the defendant 30 days within which to file their statement of defence. The plaintiffs duly filed their statement of claim and when the defendants would not file any statement of defence, the plaintiffs applied by way of motion for judgment to be entered in default of pleadings against the defendants. This application was opposed by the defendants, but on the 20th July, 1970 the High Court ruled in favour of the plaintiffs on the motion and entered judgment for the plaintiffs "against the defendants in terms of the writ and statement of claim", with costs.

It is against this ruling that the defendants have now appealed to this Court and their complaint in short is that the learned trial Judge wrongly held that an arbitration had already taken place and failed, whereas the ground on which Lambo J. had set aside the arbitration award was that the appointment of the sole arbitrator was irregular. It was also argued for the defendants that the award of judgment to the plaintiffs was erroneous in law and should be set aside. Learned Counsel for the plaintiffs conceded that the reasons given for his ruling by the learned trial Judge were wrong but sought to contend, on the basis of his notice under Order 7, rule 13, that the order made by the High Court was proper inasmuch as the arbitration clause is vague and therefore useless and the court therefore has a duty to resolve the impasse. Learned Counsel referred us to the case of Cameron vs. Cuddy & anor. (1914) A.C. 651 and to the observation at p. 657 of the report by Lord Shaw of Dunfermline to the following effect:-

"The view upon which the courts below proceeded is succinctly expressed in the judgment of Irving J. who says: 'The plain meaning of section 6 of the agreement is that there is to be an arbitration to decide what deduction is to be made, and unless and until such deduction is ascertained in the way specified in paragraph 6 the defendant has no available defence.'

Their Lordships entirely differ from such opinion. The deduction cannot be ascertained, not on account of any fault of the appellant, but because the machinery for arbitration, which was duly and properly invoked by him, broke down. The law could not permit that he should have to make payment in respect of assets which it is admitted he did not receive because the apparatus for fixing the value of the deficiency had in this way failed. Such procedure does not appear to be in accordance with sound principle."

It is easy to see that the principle of this case does not apply to the case in hand. In that case, it is manifest that the machinery of arbitration had broken down. In the present case, it is manifest that the mechanics for the appointment of arbitrators was not provided for let alone the number of arbitrators to be appointed in the first instance. But the contract of the parties still remains their contract and it will be asking too much of any court to sanction an unwarranted departure from the terms of a contract into which two free and able parties entered unless such a contract or any part of it has been lawfully abrogated or discharged. Both Lambo J. and George J. in their rulings already referred to were at considerable pains to determine the actual meaning of the clause dealing with the appointment of arbitrators in the submission of the parties dated the 20th July, 1962. They both thought the clause was ineptly phrased and Lambo J. thought as well that the plaintiffs (or their Counsel) were mistaken in their construction of the clause. Despite the observations of the learned judge the clause still remains the contract of the parties and the ordinary rules of law relating to contracts must apply. We cannot therefore accede to the argument of learned Counsel for the plaintiffs that even though the clause remains in the contract, yet this Court (or indeed any court) can treat the clause as unenforceable and therefore discountenance it in the enforcement of rights under the contract.

This is the only matter for decision in this appeal as learned Counsel for the plaintiffs himself informed us that he did not propose to support the ruling against which the appeal has been brought on the reasons given by the learned trial Judge.

The appeal will be allowed and we make the following orders:-