Bendex Engineering Corporation & Anor V. Efficient Petroleum Nigeria Limited (2000)

LawGlobal-Hub Lead Judgment Report

OLAGUNJU, J.C.A.

The appeal is against the Ruling delivered on 11/12/98 by Kassim, J., of the Enugu Judicial Division of the Federal High Court appointing arbitrators at the instance of the respondent to look into the dispute between her and the appellants arising from an agreement between the respondent and the 1st appellant, the negotiation and execution of which the 2nd appellant facilitated.

The agreement was in pursuance of a business venture during the negotiation of which the 2nd appellant who was based in the United States of America (U.S.) introduced the 1st appellant to Chief Enemour, the Managing Director of the respondent, for the purpose of exploring the possibility of establishing locally water processing and bottling technology which is the speciality of the 1st appellant in the U.S. The culmination of the business exploration by the parties was the signing of a Joint Venture Agreement, Exhibit ‘A’, leading to the incorporation on 18/4/96 of a company registered locally as ‘Efficient Bendex Industries Ltd.’ for the purpose of manufacturing and distributing bottled spring water the concluding clauses of the agreement providing as follows:
“Arbitration
All dispute, controversies, differences which may arise between the parties out of or in relation of (sic) or in connection of (sic) this agreement or the interpretation, or construction of this agreement shall be settled in accordance with the rules of reconciliation and arbitration of the accordance (sic) International Chamber of Commerce.
The award shall be final and binding upon both parties.”

It is common ground that two other agreements, viz, Sales Agreement with Supplementary Agreement and Technical Management Agreement were also executed by the parties contemporaneously with the incorporation of the Efficient Bendex Industries Ltd. It is also common ground that on 1/2/98, the respondent, acting through a Solicitor, wrote to the appellants accusing them of breach of the Joint Venture Agreement and notifying them of repudiation by him of the Agreement and demanding nomination by the appellants within 15 days of an arbitrator to look into the dispute. There was no reply to the respondent’s demands and on 11/5/98, the respondent filed an Originating Motion before the court below praying the court to appoint an arbitrator to look into the dispute arising from the execution of their Joint Venture Agreement. The appellants raised a preliminary objection to the joinder of the 2nd appellant and filed a counter-affidavit in opposition to the respondent’s application. The preliminary objection was overruled and the learned trial Judge granted the respondent’s prayer and appointed arbitrators. Against that order, learned Senior Advocate for the appellants filed 5 grounds of appeal from which he formulated the following two Issues in the appellants’ brief of argument:
“1. Whether the 2nd appellant, Ben Nwosu, can be said to be a proper party to the proceedings, inspite of his not being a party to any of the agreements particularly Exhibit “A” and if answered negatively, whether his name should not have been struck off the proceedings?
2. From all the materials i.e. affidavit in support of respondents’ motion, Exhibits A-F, further and better affidavit placed before the Federal High Court, whether there was any factual or legal basis to have ordered arbitration and appointed arbitrators in the matter?”

Learned Senior Advocate for the respondent also framed three issues, the third of which is challenging the competence of the appellants’ 5th ground of appeal while, technically, Issue Two thereof, is also challenging the 2nd ground of appeal and Issue One in the appellants’ brief of agreement formulated from that ground. I will examine the two objections later, after I would have disposed of the preliminary objection to the competence of the appeal as a primary matter. Notice of the preliminary objection was given by the respondent on 17/11/99 in which the grounds for the objection were stated as follows:
“(a) The ruling of the court below at pages 88 to 101 of the record appointing arbitrators in the above proceedings is not appealable. Section 7(4) Arbitration and Conciliation Act. Cap. 19, Vol.1 Laws of the Federation of Nigeria 1990.
(b) Appeal against any decision is tenable only if the right to do so is conferred by statute.
(c) The respondents acting by their counsel, J.A.E. Onuorah Esq – holding brief for J.B. Daudu Esq (SAN) nominated persons for appointment as Arbitrators in the proceedings of the lower court on 11/12/98 (page 115 of the record omitted)”.

Notice of the preliminary objection was also given in the respondent’s brief of argument but without offering any argument. However, in oral argument during the hearing of the appeal, learned Senior Advocate for the respondent made a brief submission that the essence of sub-section 7(4) of Arbitration and Conciliation Act is that, in an application for arbitration, the decision of the court to which the application is made is not appealable regardless of whether an appointment was made or the application was refused. Debunking the argument Miss U.N. Agomoh, who adopted the brief filed by J.B. Daudu, Esq., SAN., for the appellants contended that from the notice and grounds of appeal filed by the appellants and the issue formulated from the grounds the appellants’ complaints are not based on section 7 of the Arbitration and Conciliation Act and urged the court to discountenance the objection by the learned Senior Advocate.

Notwithstanding the terseness of the submission of learned Counsel for the appellants, there is some force in the argument whether the appellants’ complaints against the decision of the court below as manifested by a union of the grounds of appeal filed and the issues formulated from the grounds are about section 7 of the Arbitration and Conciliation Act to bring in the operation of sub-section 7(4) of the Act that makes the decision reached on certain matters to be non-appealable.  This calls for an examination of the five grounds of appeal and the issues framed from them for determination as a set off against section 7 of the Act with a view to highlighting the affinities between the issues raised by this appeal and non-appealable matters stipulated by section 7 of the Act.

Ground of appeal No.2 without the particulars complains about the joinder of the 2nd appellant in the action which is broadened out by ground 1, canvassing whether the learned trial Judge came to a right decision in basing his finding about the joinder of that appellant on the Joint Venture Agreement that had become spent at the time the respondent’s action was instituted.
Ground 3 is taken up with the wrong construction of the arbitration clause in the Joint Venture Agreement as regards the applicable procedure for regulating the parties’ dispute leading to the court below ignoring the International Chamber of Commerce Arbitration Rules expressly mentioned in the arbitration clause in the agreement in preference for section 7 of the Act, which is not mentioned in the Agreement. Ground 4 complains about granting the respondent’s reliefs on an inadequate evidence while the grouse in ground 5 is appointing arbitrators on the date, the case was fixed for ruling on the matters earlier canvassed and not for appointment of arbitrators as the court below did.

On the related issues for determination which must be framed from the grounds of appeal, Issue 1 is canvassing whether the 2nd appellant can be said to be a proper party to the respondent’s action at the court below which is expressly stated by the appellants to be formulated from ground 2. Issue 2 agitating whether there was any factual or legal basis for ordering appointment of arbitrators and for making the appointment is framed from grounds 3 & 4 on which ground 1 has a marginal impact.

Within the framework of section 7 of the Arbitration and Conciliation Act, whether a decision is appealable or not must be tested against sub-section 7(2) & (3) thereof by reference to which sub-section 7(4) delimits non-appealable matters. Sub-section 7(2) & (3) relate to the procedure for appointing an arbitrator where such procedure is not stipulated in the parties’ agreement and provided the method of curing defaults arising from the conduct of the arbitration. The material parts of the two sub-sections read:
“(2) Where no procedure is specified under subsection (1) of this section
(a) in the case of an arbitration with three arbitrators, each party shall appoint one arbitrator and the two thus appointed shall appoint the third, so however that:
(i) if a party fails to appoint the arbitrator within thirty days of receipt of a request to do so by the
other party; or
(ii) if the two arbitrators fail to agree on the third arbitrator within thirty days of their appointments, the appointment shall be made by the court on the application of any party to the arbitration agreement;
(b) in the case of an arbitration with one arbitrator, where the parties fail to agree on the arbitrator, the appointment shall be made by the court on the application of any party to the arbitration agreement made within thirty days of such disagreement.
(3) Where, under an appointment procedure agreed upon by the parties:
(a) a party fails to act as required under the procedure; or
(b) the parties or two arbitrators are unable to reach agreement as required under the procedure; or
(c) a third party, including an institution, fails to perform any duty imposed on it under the procedure,
any party may request the court to take the necessary measure, unless the appointment procedure agreed upon by the parties provides other means for securing the appointment.
(4) A decision of the court under subsections (2) and (3) of this section shall not be subject to appeal.”
From the reading of those provisions, it is manifest that sub-section 7(2) deals with a situation where no procedure for appointing an arbitrator is specified in the parties’ agreement while sub-section 7(3) covers a situation where under the appointment procedure agreed upon by the parties, there is default on the part of one of the parties or a third party to act or where the parties or two arbitrators fail to reach an agreement. In either event, an alternative formula to resolve the deadlock is provided.

If those be the two types of decisions under the Arbitration and Conciliation Act from which an appeal to a higher court is barred, how far can the two issues formulated for resolution in the appellants’ brief of argument, reproduced above, be said to come within the ambit of the dispute for which sub-sections 7(2) & (3) of the Act provide a formula for resolution? Issue 1 agitating the propriety of the joinder of the 2nd appellant in the action does not touch on the appointment procedure as the focus of that issue is, whether one who is not a party to an agreement can be held to be a party to the dispute arising from the agreement. Issue 2 which is nebulous traverses the whole gamut of the factors which the learned trial Judge took into consideration in exercising his discretion to appoint arbitrators. This is a far cry from a complaint about the procedure for appointing arbitrators laid down by sub-sections 7(2) & (3) of the Act to provide occasion for the invocation of sub-section 7(4) thereof.

True enough, sub-section 7(4) of the Arbitration and Conciliation Act renders non-appealable certain proceedings on the appointment of arbitrators yet the provisions is explicit about the scope of the matters coming within its purview and is not intended as a blanket deprivation of the right of appeal on any matter touching on arbitration. Deprivation of the right of appeal is confined to the question of appointment procedure as specified in sub-sections 7(2) & (3) of the Act. Therefore, to invoke the provision of sub-section 7(4) the court must first be satisfied that the grounds of appeal and issues formulated from the grounds relate to appointment procedure as laid down by sub-sections 7(2) & (3) and not just matters that are peripheral to those specified therein.

The fact that learned Counsel for the appellants nominated persons for appointment as arbitrators shortly after the court’s ruling was delivered on 11/12/98 is particularly noteworthy as showing that any complaint touching on subsection 7(2) of the Act cannot be made a ground of appeal since the parties had voluntarily agreed on the composition and membership of the arbitration which the court endorsed. Similarly, the occasion for any of the contingencies envisaged by sub-section 7(3) not having arisen a recourse to the provisions of that sub-section to satisfy the disqualification from appealing imposed by sub-section 7(4) is illusory and short-sighted. The result is that the two limbs of section 7 of the Act which sub-section 7(4) thereof prescribed as conditions precedent to a disqualification from exercising any right of appeal having been shown not to be part of the appellants’ complaint in this appeal that, sub-section is an empty shell for the purpose of disqualification from appeal on the decision of the trial Court and its invocation as a preliminary objection to the competence of this appeal is hollow and a mirage.

In conclusion, let me say with emphasis that forfeiture of the right of appeal is a serious matter beyond the mere gambit of a preliminary objection as a daunting ploy calculated to stun an opponent as the right of appeal is a constitutional right: see Eze v. Ejelonu (1999) 6 NWLR. (Pt.605) 134, 142-143; and Ibrahim v. Balogun (1999) 7 NWLR (Pt.610) 254, 266. Without getting involved in doctrinal debate on the constitutional implications of sub-section 7(4) of Arbitration and Conciliation Act which is outside the scope of this appeal. I feel impelled to note in passing the approach to the interpretation of legislation on the deprivation of right such as sub-section 7(4) of the Act. Particularly instructive is the principle that, any legislative provision which seeks to deprive the citizenry of his rights, be they personal or proprietary rights, must be interpreted fortissime contra-preferentes, i.e. strict construction against the person relying on the power of deprivation. See Bello v. The Diocesan Synod of Lagos, (1973)3 SC 103, (1973) 1 All NLR (Pt.1) 247, 268; Ereku v. Military Governor of Mid-Western State (1974) 10 SC 59, (1974) 1 All NLR (Pt.11) 163, 170-171; Peenok Investments Ltd. v. Hotel Presidential Ltd. (1982) 12 SC 1, 25-26, (1983) 4 NCLR 122; and Din v. Attorney-General of the Federation (1988) 4 NWLR (pt.87) 147, 184-185.
Applying that principle to the interpretation of sub-section 7(4) of the Arbitration and Conciliation Act, the court must limit itself severely to the condition laid down by that sub-section which is exclusion from appeal of only matters relating to procedure for appointing an arbitrator as specified by sub-sections 7(2) & (3) thereof, an occasion which can only arise where the grounds of appeal and the issues formulated from the grounds complain about such matters. The court cannot be cajoled to take liberties with the mere form of the prohibition to wander outside the matters defined by sub-section 7(4) as the limits of the matters expressly excluded from appeal. Therefore, on the facts of this case and the applicable principles of law, objection to the competence of this appeal by learned Senior Advocate for the respondent is on a sticky wicket. It lacks merit and I overrule it.