United World Limited Inc. V. Mobile Telecommunications Services Limited (1998)
LawGlobal-Hub Lead Judgment Report
PATS-ACHOLONU
The appellant a U.S based registered company engaged in newspaper publication and advertisement entered into a contract with the respondent a mobile telecommunication services company for the appellant to place 1/8 page advertisement as advertiser in a newspaper known as USA Today for the sum of 38,250 (Thirty eight thousand two hundred and fifty dollars) to be paid by the respondent within 30 days of signing of the contract. The money became due for payment on 1/7/93.
There was a clause in the contract for reference to arbitration. The respondent of the publication failed to pay even though there was lacked a clause that failure to pay within that time would attract 1.4% flat monthly interest rate. The appellant was forced to take out summons on 22/2/95 claiming the amount under the contract. The respondent on 7/3/95 entered a conditional appearance and the appellant filed summons for judgment under Order 10 of the High Court of Lagos State (Civil Procedure) Rules 1972. On the receipt of same the respondent applied for a stay of proceedings and stared that there exists a dispute which should be referred to arbitration. The court below gave a considered ruling and made an order staying further proceedings pending arbitration. Piqued by the decision the appellant filed four grounds of appeal and framed four issues from the same grounds.
The issues are as follows:
(i) Whether the respondent as defendant/applicant satisfied the statutory requirements and conditions under the Arbitration and Conciliation Act. Cap.19, Revised Laws of the Federation, 1990 to entitle them to stay the action of the appellant as plaintiff at the trial court pending reference to arbitration?
(ii) Whether prima facie the contract between the parties, the learned trial Judge properly construed the terms of the agreement before granting the defendant’s application to stay the plaintiff’s action pending reference to arbitration?
(iii) Whether the learned trial Judge considered all the issues of law raised by the plaintiff/respondent before granting the defendant/applicant’s application to stay further proceedings pending reference to arbitration?
(iv) Whether it is the plaintiff’s claim or defendant’s affidavit in support of an interlocutory application that determines the jurisdiction in a matter. If it is the plaintiff’s claim, whether the trial Judge was right in finding that negligence is an issue for which he has to decline jurisdiction pending reference to arbitration?
Strictly speaking there is only one issue which is issue No. 1 or otherwise to be stated thus: whether on the consideration of the totality of the case the court below should have made an order of reference to the arbitration on the facts of the case.
In examining the thrust of the case it is considered neat and essential that I set out the provision of section 5 of the Arbitration and Conciliation Act Cap 19 of the 1990 Laws of the Federation.
“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.
- 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.” The cornerstone of the provision is that the subject matter must be the type which ought or should be referable to an arbitration. In Kano State Urban Development Board v. Fanz Construction Co. Ltd (1990) 4 NWLR (Pt.142) I the court held as follows.
“The exercise of the power to stay proceedings in the court pending the determination of arbitration proceedings can only be and must be exercised in accordance with the provisions of the law section 5 of the Arbitration Law. Failure to exercise the power in accordance with the provisions of the law, renders the decision or order a nullity.”
See also Kurubo v. Zach-Motision Nigeria Ltd. (1992) 5 NWLR (Pt. 239) 102 at 118. What are the essential elements that would give rise to reference to arbitration. A clause on the contract states
“‘Differences deriving from the present contract shall be settled definitely according to the rules of conciliation and arbitration of the International Chamber of Commerce by one arbitrator named in accordance with the rules …”
“United World Ltd Inc. reserves that right to undertake legal proceedings as may be adequate as precautionary measures in the jurisdiction where the advertiser possesses assets”In its affidavit of motion on notice praying the court to stay proceedings pending reference to arbitration the defendant respondent stated in its affidavit that notwithstanding that the agreement for advertisement by the appellant was entered on 2/6/93, and the advert should be placed within a short period afterwards and at a time that the newspaper would carry prime and current news on Nigeria, the advert was made on 14/12/93 six months after the contract. It therefore alleges negligence in publishing the advertisement late and at a time the newspaper contained out of date information. The cause of action as far as the appellant is concerned, as can be discerned from its pleadings is that of non-payment for work done. Para 8 of the statement of claim states:
“On the due date being 1st August, 1993, the defendant refused neglected and failed to and effect the payment in accordance with the terms of the contract.
- There has been no denial but rather acknowledgment of the defendant indebtedness to the plaintiff. The plaintiff will rely particularly on defendant’s letter of 24/1/94 acknowledging its indebtedness and willingness to pay:’
The pleading was filed in April 1995 and a motion for entering judgment pursuant to Order 10 rule 1 of the High Court of Lagos State was filed on 19/4/95. The plaintiff appellant relied heavily on the letter of the respondent dated January 24th 1994 made without prejudice “sine acerbitate.” The letter states thus: “While we were generally pleased with the quality of reporting on Nigeria and M.T.S., in particular, in the survey, we were and are most dissatisfied with the lengthy timing delay, some five months in issuing the survey, as clearly evidenced by the editor’s note on the face of the survey summary. Such delay resulted in that many of the facts and comments described were out-dated, this is certainly not professional reporting and can/does result in wrong or misleading information about Nigeria being interpreted by the newspaper’s readers.
Despite the above, we do acknowledge, in principle, our indebtedness for advertising expenses. We have yet to receive in this office your full commercial invoice, plus your relevant exchange control permission from the appropriate Nigerian ministry in order to remit the relevant funds through the Central Bank of Nigeria and its authorized agents, in compliance with current Nigerian Legislation.”
The argument of the appellant was that the objection was not made 15days after the advertisement on publication in accordance with the provision of clause 2.2 of the agreement and that failure to complain at the due date is final to the case being put up by the respondent. The respondent said time was the essence of the agreement and that the interval of six months shows clement of negligence. It is rather interesting that in its letter under reference although it complained of time element, it raised an issue of delay, it evinced an intention to pay, although that letter was made without prejudice. Having acknowledged indebtedness in otherwords gave the impression that it was willing and ready to pay the debt and however pointed out some short coming in carrying out the contract, can the respondent now resile? Is it really resiling? In para 561 Vol. 2 of the 4th Edition of Halsbury’s Laws of England the learned editor states the law as follows.
“When an arbitration clause in a contract provides that, any dispute of difference ‘in respect of’ or ‘in regard to’ or ‘under’ the contract shall be referred to arbitration, and the parties are at one asserting that they entered into a binding contract, the clause will apply; a stay will therefore be granted even if the dispute involves an assertion by one party that circumstances have arisen, whether before or after the contract has been partly performed, which have the effect of discharging one or both parties from all subsequent liability under the contract.”
In Heyman v. Darwins Ltd (1942) A.C. 356; (1942) 1 All E.R. 337 Viscount Simon held as follows.
“Two further observations must be made in conclusion. The first is that, notwithstanding the general validity of the above observations, the governing consideration in every case must be the precise terms or the language in which the arbitration clause is framed. Its terms may, of course, be such as will either expressly or by implication reduce what would otherwise be the full ambit of the clause, or again, will extend it yet further. Secondly, what I have endeavoured to formulate in this summary is concerned solely with the question whether or not an arbitration clause applies…
The principles which should govern the exercise of judicial discretion on this matter have often been laid down and are well understood and the extent to which appellate authority may interfere was last stated in this House in the case of Charles Osenton & Co. v. Johnson (17). I think the Court of Appeal was right in reversing the decision of Cassels, J., on this head. Even if the learned Judge were right in regarding the issue as one in which nothing but a question of law is involved, that circumstance would not necessarily, and in all cases make it right to refuse a stay, The observation of Lord Parker in Bristol Corpn v. John Aird (18), refers to a question of constructions. Moreover, in the present case questions of fact may well have to be determined and the dispute as a whole is of a class which is constantly dealt with by an arbitrator. There is no sufficient reason why the matter should not be referred, and therefore, by the express language or the [Arbitration Act. 1889], S. 4 there must be a stay.” In this case the agreement between the contending parties contain arbitration clause; the application to stay proceedings was made by the respondent who alleged inexcusable delay amounting to some negligence. In this circumstance it is the contention of the respondent that there is no sufficient reason why the matter should not be submitted for arbitration, that it was at the time when the action was commenced and still remains ready and willing to do all things necessary for the proper conduct of the arbitration. A matter shall be referred to arbitration when it becomes or is to be interpreted to mean a difference or dispute exists. The difference or dispute must necessarily arise from the clauses contained in the agreement.
At para 503 Vol. 24th Edition of the Halsbury’s Laws of England the learned authors wrote as follows
“The dispute or difference which the parties to an arbitration agreement agree to refer must consist of a justiciable issue triable civilly. A fair test of this is whether the difference can be compromised lawfully by way of accord and satisfaction. Thus an indictment for an offence of a public nature cannot be the subject of an arbitration agreement ([see R. v. Blakemore (1850) 14 QB 544; R. v. Hardey (1850) 14 QB 529] nor can disputes arising out of an illegal contract [see He Boks and Co and Peters Rushton and Co. (1919 1 K.B 491] nor disputes arising under agreements void as being by way of gaming or wagering, equally, disputes leading to a change of status such as divorce petition, cannot be referred, nor, it seems can any agreement purporting to give an arbitrator the right to give a judgment.. .. [See The Sylph (1867) LR 2A & E 24]. Similarly, there is no dispute within the meaning of an agreement to refer disputes where there is no controversy in being, as when a party admits liability but simply fails to pay.”
A contrary arises when the parties to an agreement cannot or fail to agree or resolve an issue arising out of the content of the agreement and each person either clings to his own view point or becomes indomitably not amenable to reason and common logic. It equally arises where there has been infraction of one’s right or instead it could be threatened. In case of an agreement with a clause for reference to arbitration the subject must be such as capable of being referred to an arbitration. Where a party has admitted liability or compromised his stand by some admission capable of altering the position of the parties in respect of the matter in dispute the matter can no longer be for reference to an arbitration. In Parkes v Smith (1850) 16 QB at 297 of 309 it was held that an agreement for ascertaining an amount due by outgoing partner amounted to a submission to arbitration. Equally too, it was held that agreement to refer questions between landlord and tenant on termination of tenancy with power to hear witness amounted to a submission. See Re Evans, Davies and Caddick (1870) 22 LT 507, Re Hohenzollern Act for Locomotive ball and city of London contract corps (1886) 54 L.T. 596. Contrast however these with other cases where the agreement does not amount to submission. Goodyear v Simpson (1846) 15 M.&.M 16 which stipulated that a clerk should adjust share of profits between partners in stage-coach, Jenkins v. Baham (1855) 15 C B 168 an agreement for valuation of ecclesiastical property between the incoming and outgoing incumbent. Re Dawdy (1885) 15 QBD 426 which was an agreement as to compensation payable by landlord to out-going tenant where witnesses were called and In fact partners erroneously referred the matter for arbitration.Now the appellant’s counsel contended that the subject matter was not within the contemplation or the contractual agreement and it falls outside intention of the parties. The respondents counsel argued that there were no counter affidavit specifically contradicting the averment in paras 6, 7, and 8 of the affidavit in support to show contrary evidence. With respect to the submission of the respondent on this line of thinking. I do not agree with his views. It is a matter of law whether such an issue should or ought generally to be referred to an arbitration. One does not get himself cooked in because he failed to file a counter affidavit. The argument being verily canvassed by the appellant counsel is that not withstanding the reference to arbitration it was equally provided thus in the agreement in clause 2
“United World Ltd Inc. reserved the right to undertake legal proceeding as may be adequate as precautionary measures in the jurisdiction where the Advertiser possesses assets’”
He intoned that had the court below given a proper construction to the purport or tenor of the clause he would definitely not have referred the matter for arbitration. In the agreement it was specifically put on these words.
“Claims by the advertiser to be valid must be formulated and accepted in writing by United World Ltd Inc. not later than 15 days of the date of publication.”
What can be read, or gleaned from this provision of the clause is that the complaint leading to a claim must be made and accepted in writing within 15 days. In the present case it was not done but rather so many days or weeks afterwards. Equally much was made on the delay. In reading the letter from the respondent in which they admitted to pay albeit (without prejudice) the mention of delay was perfunctory and it did not seem by the nature of protest which is weak to be taken beyond board. Was time really of essence? The agreement stales thus:
“Delay in Publication: United World Ltd Inc. is not obliged to publish the advertisement on a fixed dale and cannot be held responsible for eventual delay in the publication of the advertisement. United World Inc shall endeavour provided they have been properly warned by the publisher to inform the advertiser of such a delay.”
The various clauses I have read seem to me to be weighted a lot in favour of the appellant. Can the respondent really complain about the delay having regards to the line of that clause? I equally doubt the strength of its protest having regard to failure to protest within 15 days. The more one looks into the matter the more one appears to discern an inescapable belief nagging at the back of the mind that notwithstanding the provision for arbitration the appellant had a ready made alternative remedy which is by court process. The agreement is couched in such a manner that the appellant had a lot of things going for it leaving the respondents to pick up the crumbs.
When a correspondence is written with an expression “without prejudice,” what does it imply: there have been a lot of judicial decisions on this hackneyed and worn out phrase: See Walter v. Wilsher (1889) 23 QDB 335. In Tomlin v. Standard Telephones (1969) 3 All E.R. 201 at 230-4 ….. it was held as follows
“A point that arises is that all the letters written by the agent of the insurance company bore the words “Without Prejudice. The point is taken that, by reason of those words, there could not be any binding agreement between the parties and it was said, indeed, on behalf of the defendants that the letters were not admissible. I feel no doubt, as the learned Judge felt no doubt, that the letters were admissible, because the point was whether there had been a concluded agreement of any kind between the parties in accordance with that correspondence, and it would be impossible to decide whether there was a concluded agreement or not unless one looked at the correspondence. The learned Judge quoted a statement by LINDLEY, L.J., which really was in the case no more than a dictum but seems to me to have great force and to be of great importance in regard to the case. That was in Walker v. Wilsher [(1889), 23 QBD 335.] When the case is looked at, it appears that in fact the decision was that the letters in question should not have been looked at for the purpose of the case at all and [hat, consequently, the judge in the court below was at fault in relying on them for the purpose of depriving the party of his costs. But in the course of his judgment, LINDLEY, L.J., said [at 337:
‘What is the meaning of the words “without prejudice”? I think they mean without prejudice to the position of the writer of the letter if the terms he proposes arc not accepted. If the terms proposed in the letter are accepted a complete contract is established and the letter, although written without prejudice, operates to alter the old state of things and to establish a new one.’”
I think that the intention of the respondent is that it is indebted to the appellant which it has evinced an intention and was understood that it would be paid. With the nature of the agreement which appeared to be lopsided in favour of the appellant, it is a difficult going for the respondent. Going through the whole gamut of this case it can not be stated that the subject matter is one for submission in the light of some empirical factors that are attendant to this case as have been highlighted-what with delay which is not to be treated as delay, the non protest within 15 days, the fact that the appellant has untrammeled power to institute an action where the respondent has an asset, and the subtle admission of liability.
When a party to an agreement with a reference to arbitration has compromised his position by being signatory to the agreement the contents of which give numerous alternative remedies to the other party, other than resort to arbitration, and by evincing an intention to compromise to an act of the party which he is complaining about, he has robbed himself of competence or premise of referring the subject matter of complaint to an arbitration. It seems to me that the subject matter is one that cannot be referred for arbitration having regards to what I have observed. There is hardly anything left to refer.
In the circumstances the appeal succeeds and the ruling of the court granting a stay pending reference to arbitration is set aside. The respondent to pay cost assessed of N4000.00.
Other Citations: (1998)LCN/0376(CA)