Bauhaus International Ltd & Anor V. Midfield Investment
LawGlobal-Hub Lead Judgment Report
UWANI MUSA ABBA AJI, J.C.A.
This is an appeal by the Defendants/Appellants, simply called Appellants against the Ruling of Hon. Justice I.U. Bello of the High Court of the Federal Capital Territory, Abuja delivered on the 8th November, 2005, whereby the learned trial judge ordered the parties to proceed to trial having previously set aside an arbitral award on the basis of an alleged Arbitrators misconduct.
The Respondent commenced the substantive suit against the Appellants claiming, inter alia, declaratory and monetary damages resulting from an alleged contract. The parties were subsequently referred to arbitration whereof the Respondent was awarded the sum of N15 million. The Appellants vide a motion filed on the 6th May, 2004 applied to the lower court for an order setting aside the award on the basis of the Arbitrator’s alleged misconduct.
The motion to set aside the award was brought upon the following grounds:-
- That the Arbitrator exceeded his jurisdiction by deciding on the issues not submitted to him for
determination.
- That the Arbitrator misconducted himself in that he based his award on unenforceable agreement, It, the agreement being tainted with illegality.
- That the Arbitrator misconducted himself in that he based his award on an agreement, which is operational upon happening of an event which event did not happen.
- The Arbitrator misconducted himself in holding that 1st defendant/applicant breached his agreement with the plaintiff/respondent when there was no breach.
- The Arbitrator misconducted himself when he based his award on an agreement that was frustrated.
- The award was improperly procured in that it was based on illegal and unenforceable agreement.
- The Arbitrator misconducted himself when he arbitrarily made an award of excessive, punitive and unwarranted damages based on extraneous considerations.
The Respondent undertook not to oppose the application. The award was consequently set aside by a ruling of the court dated 31st may, 2004, thus:-
“The application is hereby granted and orders made as prayed.”
The court thereupon called upon the counsels to address it on the next step to follow after setting aside of an award. The court then posed three questions that counsels were required to address it upon, namely:-
i. Does the setting aside bring the matter to an end?
ii. Will the court be at liberty to proceed with the matter iii. Will the parties revert back to the process of arbitration denovo in pursuance of the arbitration clause under the agreement?
Counsels duly addressed the court which delivered its Ruling, the subject of the present appeal. The ruling delivered on the 8th November, 2005 stated inter alia:-
“Have carefully considered the arguments of Defendants Counsel and against which, there is no response from the Respondent, I am of the view notwithstanding that the proper order to make after setting aside the arbitral award is that plaintiff can proceed to lead evidence in proof of his case. The provisions of the need for an independent arbitrator having been explored without success, I think my conclusion to or ask the Plaintiff to proceed in proof of his case is proper. It’s so ordered. The position of Defendant is discountenanced.”
The Appellants are dissatisfied with the said ruling and appealed to this court vide a Notice of Appeal filed on the 22nd November, 2005. The grounds of appeal without their particulars are hereby reproduced.
Grounds of Appeal
- The learned trial judge erred in law when he failed to consider the issue of jurisdiction raised by way of preliminary objection by the defendants/Appellants and thereby occasioned miscarriage of justice.
ii. The learned trial judge erred and misdirected himself in law when he held “The provision of the need for an Independent arbitrator having been explored without success, I think my conclusion to or ask the plaintiff to proceed in proof of his case is proper. It is so ordered. The position of the defendant is discountenanced case adjourned to 8th December, 2005 for hearing.”
iii. The learned trial judge erred in law when he assumed jurisdiction to proceed with the trial of this suit when his order of 31st May, 2004 was a final order and being so he is deprived of the jurisdiction to hear the suit again or entertain any matter or application in the suit or matter.
In compliance with the Rules and Practice of this court, parties filed and exchanged briefs of argument. In the Appellant’s brief settled by Ikechukwu Ezechukwu, Esq., three issues were formulated for determination of the appeal, namely:-
(1) Whether the trial judge considered in his ruling, the jurisdiction issue raised by the Appellant and if yes, whether he was right in assuming jurisdiction to try the case.
(2) Whether having regard to the ruling of the trial judge on 31st day of May, 2004 setting aside the award, the rights of the parties to be adjudicated upon by the court has not been exhausted and, if so, whether the court has not become funtus officio.
(3) Whether the order made by the Honourable court on the 31st day of May 2004 setting aside the award is not a final one and if so, whether the court is not deprived of the Jurisdiction to further entertain the suit.
In the Respondent’s brief, settled by Hon. Tony Anyanwu, Esq., learned counsel formulated a lone issue for determination to wit:-
Whether the trial court was right to order the Parties to proceed to trial having set aside the arbitral award on grounds of misconduct.
At the hearing of the appeal on the 27th May, 2008, learned counsel for the Appellant, Ezechukwu, Esq. adopted and relied on the Appellants’ brief of argument dated 23rd June, 2006 and filed on the 29th June, 2006 and urged the court to allow the appeal as the contract between the parties is an illegal contract.
Mr. Anyanwu, for the Respondent adopted and relied on the Respondents brief of argument dated 3rd October, 2006 and filed on the 11th October, 2006 as their argument in the appeal and urged the court to dismiss the appeal.
I have considered the three issues formulated for determination by the appellant’s counsel and the lone issue formulated by the Respondent’s counsel and I am of the view that the lone issue formulated by the Respondent could be subsumed into the three issues formulated by the Appellants as in con they argue the same issue more particularly when all the 3 issues formulated by the Appellant were taken together. I will also adopt same in the determination of the appeal.
Arguing issues 1, 2, and 3 together learned counsel for the appellant Ezechukwu, Esq., submitted that the learned trial judge failed to consider the issue of jurisdiction raised by the Appellant as the trial judge made no mention of the objection as he simply said:-
“The position of the defendant is discountenanced” and no more as there were no reasons given nor consideration given to the numerous legal authorities cited by the Appellant. It is submitted that the court is bound to consider all the issues placed before it particularly when the failure to do so will occasion a miscarriage of justice as was done in the instant case. It is his view that if the court had considered the issue of jurisdiction, it would have come to the conclusion that it had became funtus officio and thereby lacking the necessary jurisdiction to continue to hear the case.
It is the view of Mr. Ezechukwu that the lower court lacks the necessary jurisdiction to entertain the suit or any other application of the Respondent.
He submitted that the order made by the lower court on the 31st day of May, 2004 was final decision or order and being so, the jurisdiction of the court to entertain the suit or any other application of the Respondent is ousted. It is submitted that once a court makes a final decision in any particular issue, the court becomes funtus officio with respect to that particular matter and that not even the court that made the order has power to revisit the Issue except if the decision is a nullity and by reason of the fact that it was obtained by fraud or illegality.
Learned counsel submitted that the order of the lower court made on the 31st day of May, 2004 is a final order and not interlocutory order, and has finally disposed of the rights of parties as there is nothing left to be decided between the parties, citing in support, the case of Seven-Up Bottling Co. v. Abiola (2001) 38 WRN 55 at 59 and Oguntimehin v. Tokunbo (1957) 2 FSC 56 to the effect that where the order made finally dispose of the rights of the parties, then it ought to be treated as a final order. Learned counsel referred to the grounds upon which the award was set aside and the 20 paragraph affidavit where he stated contains details of the illegality and sundry vices in the agreement. It is submitted that the said allegations contained in the affidavit in support of the application were neither denied nor controverted in any way by the Respondents thus conceding to all the depositions and the grounds upon which the application was founded and that the court granted the Appellants the prayer sought. The case of PW Vs Gamber (2001) 5 WRN 144 at 147 was referred to. It is submitted that the Respondent having admitted that the agreement from where all his rights and that of the Appellants flow is unenforceable in law as found by the order of the court made on the 31st may, 2004, then nothing remains of the right of the Respondent to be adjudicated upon as his right is extinguished by order of May 31st 2004. The case of Eduak (Rtd) v. Nwoko (2003) 28 WRN 85 at 91 was referred to.
It is also submitted that, it is the law that once a contract is tainted with illegality, no court can enforce it as no one will be allowed to benefit from it, it is void and things emanating from that transaction is a nullity citing the cases of Okoya Vs Santili (1994) SCNJ 333; and Alao Vs. A.C.B. (1998) 2 SCNJ 17 at 46.
Learned counsel referred to paragraphs 9, particularly clause 4 of the agreement i.e. exhibit C3, and 10 of the affidavit of Obi Nwakor to bring home his argument on the illegality of the contract, that provision was made for money to be paid to “contract persons” that “contract persons” referred to in clause 4 of Exhibit C3 are officials of the Federal Ministry of Works and Federal Housing Authority (FHA). That “contract persons” are officials of Government which is against Section 22 of the Anti Corruption (ICPC) Act. It is therefore submitted that, allegations of illegality of Exhibit C3 which made obligations and rights arising therefrom unenforceable are conceded to by the Respondents and upon which the court below granted their prayers to set aside the arbitral award. It is thus submitted that the Order of the court below made on the 31st May 2004 disposed of the rights of the parties with respect to suit No: FCT/HC/CV/106/2001 and therefore the court became funtus officio as that order is final and not interlocutory citing in support the case of Joe Vs. Nzegwu (2001) 74 WRN 113. It is therefore the view of learned counsel that the lower court has become funtus officio and deprived of the jurisdiction to entertain or adjudicate on any matter, application in or concerning the present suit including the current order of court to start the matter afresh. In aid of his submission, learned counsel also made reference to a book, Law and Practices of Arbitration and Conciliation in Nigeria: by Orojo & Ajomo at page 283 that once an award is set aside on grounds of illegality, the entire contract upon which the proceedings in dispute arose comes to an end as the parties are incapable of returning to the status quo. We were urged to resolve all the issues in favour of the Appellant and to allow the appeal.
In his response, learned counsel for the Respondent Hon. Anyanwu, Esq., submitted that the trial court was right to order the parties to proceed to trial having set aside the arbitral award on grounds of misconduct, without more. It is submitted that the trial court has the option of referring the matter for further arbitration or a denovo hearing before the court citing the case of A. Savoia Ltd Vs Sonubi (2000) 12 NWLR (pt. 682) 539 to the effect that the court’s jurisdiction to interfere with the award of an arbitrator is limited to setting aside an award or remitting a matter to the arbitrator for reconsideration.
It is submitted that the lower court’s Order setting aside the arbitral award decisively nullified the arbitral proceedings and the subsequent award relying on the case of Arbico (Nig.) Ltd Vs. NMT Ltd (2002) 15 NWLR (pt. 789) 1. Learned counsel submitted that a void arbitral award cannot provide the requisite platform to predicate the Appellant’s erroneous assumption that the parties’ substantive rights have been determined.
Learned counsel referred to the provisions of Sections 29 and 30 of the Arbitration & Conciliation Act, Laws of the Federation of Nigeria, 2004 upon which the Appellants predicated their application for an Order setting aside the subject of arbitral award and submitted that the lower court duly exercised its power by ordering the parties to proceed to trial. He submitted that the Appellant’s argument in assuming that the Respondent’s non objection to the motion seeking a set aside of the arbitral award was ipso factor, an admission of the grounds enumerated in the motion is misconceived.
Hon. Anyanwu, Esq. submitted that the Appellants supporting affidavit was vague on the specific allegations concerning the arbitrators misconduct, and that the Appellant’s contention shows that their affidavit embody legal conclusion contrary to Section 87 of the Evidence Act especially the legality of the subject “MOU”. It is further submitted that the issues of “legality” and “conditions Precedent” are subject to strict pleading and that there is an obligation on the Appellants to specifically particularise the illegal conduct in the statement of defence. He cited Order 23 Rules6 (1) and (2) of the FCT High Court Civil Procedure Rules, 2004. He also submitted that the allegations which boarder on criminal allegations must be proved beyond reasonable doubt. It is also submitted that the Appellant’s counsel erroneously argued that the lower court’s order setting aside the arbitral award qualified as a final order and as such rendered the lower court funtus officio. It is the view of the learned counsel that the order was merely interlocutory and not final and by finality means that such an issues does not by normal judicial process return to the same court except by an appellate intervention citing in support the case of Eduak Vs. Nwoko (2003) 2 WRN 85 at 93. That the litmus test for determining and indeed resolving the “finality status” depends on the nature of the order made and the nature of an application or proceedings, citing also the case of Akinsanya Vs. UBA Ltd (1986) 4 NWLR (pt. 35) 273 at 308. It is therefore submitted that the issue of finality does not arise as a decision to set aside an arbitral award does not determine the substantive rights of the parties. We were urged to resolve the finality status of the subject Order setting aside the arbitral award by considering the nature of an Order made which merely set aside an arbitral award and subsequently ordered the parties to proceed to trial and to dismiss the appeal.
I have given due consideration to the submissions of learned counsel and the authorities cited in support and, I am of the view that, the gravemen of the Appellant’s complain in this appeal is the order of the lower court directing the parties to proceed with the trial of the substantive matter after setting aside an arbitral award on the grounds of Arbitrators misconduct. The contention of the Appellant was that the order made by the learned trial Judge on the 31st May 2004 was a final order and not interlocutory decision, so the issue of the trial court ordering the parties to go to trial should not have arisen. The Respondent on the other hand is of the view that what the lower court did was right when it directed parties to proceed to trial after the setting aside of the award as that was the only order for it to do, as the setting aside of the award does not determine the rights of the parties under the contract.
To appreciate the stance of the parties, it is necessary to go back to the Appellant’s motion seeking to set aside the arbitral award. I have from the onset of this judgment set out the grounds upon which the application to set aside the award was made. I need not reproduce them here again, but include inter alia the fact that the Arbitrator exceeded this jurisdiction by deciding issue not submitted to him for determination and misconduct. The grounds also are reflected in the affidavit of Obi Nwakor, Esq. in support of the motion to set aside the award.
Section 30(1) of the Arbitration & Conciliation Act cap 19 Laws of the Federation of Nigeria, 2004, under which the application was brought provides as follows:-
30(1) Where an arbitrator has misconducted himself, or where the arbitral proceedings or award, has been improperly procured; the court may on the application of a party set aside the award.
(2) An arbitrator who has misconducted himself may on the application of any party be removed by the court. Now the question is, was the order of the lower court made on the 31st May, 2004, setting aside the arbitral award a final order or decision, and if so, whether the lower court has not become funtus officio and therefore deprived of jurisdiction to entertain the suit or any other application of the Respondent.
It is clear from the proceedings of the lower court, the court on the 31st May, 2004 granted the Appellants application to set aside the arbitral award of N15 million granted on favour of the Respondents. There was no objection on the part of the Respondents to the setting aside of the award. Thereafter, the lower court decided to proceed with the trial of the matter. There was objection from the Appellants on the ground that the order made on the 31st May, 2004 was a final decision and therefore the learned trial judge was functus officio. How does one determine whether the order of a trial court is a final one or an interlocutory one? The test to be applied in determining whether an order of court is final or an interlocutory one is one which looks at the order made and not at the nature of the proceedings. If the rights of the parties are finally determined by the order appealed against, that decision is a final one. See FBN Bcc Vs Fashar (2000) 6 NWLR (pt.662) 573; Maduabuchukwu Vs Maduabuchukwu (2006) 10 NWLR (pt.989) 475. In the case of Akinsanya Vs UBA Ltd (1986) 4 NWLR (pt.35) 273, the test approved by the Supreme Court is one which looks at the order made when it cited with approval, the decision of the court of Appeal of England in the case of Bozson Vs Altrincham UDC (1903) 1 KB 547 at 548. Therein Lard Alverstone, the learned chief Justice of England stated the test/question, thus:
“Does the judgment or order, as made finally dispose of the rights of the patties? If it does, then the order is final order; if not, it is interlocutory.”
Thus a final order or decision is final notwithstanding that it was made in an interlocutory motion or it is subject to appeal. What is important is the nature of the order made. If from the order of the court no further reference need be made to the court, the decision is final. Likewise an order or judgment which at once affects the status of the parties ought to be seen as final.
Now applying this test so lucidly enunciated by the Court of Appeal and the Supreme Court to this case, I am of the firm view that the order appealed against is final order. This is manifest from the nature of the application before the lower court; to set aside an arbitral award on grounds of Arbitrator’s misconduct restores the parties to status quo ante. Once the award is set aside, there is nothing left for the trial court to adjudicate upon.
The court has therefore becomes functus officio. It is without jurisdiction to proceed to try the matter. The courts jurisdiction to interfere with the award of an arbitrator is limited to setting aside the award of an arbitrator or remitting the matter to arbitration for reconsideration. The court has no power to determine any matter the subject of an arbitration proceeding.
An application to set aside an arbitral award is an invitation to the court to render the whole arbitration proceedings null and void. The order made is final. In the instant case, the lower court was therefore without jurisdiction to proceed with the hearing of the suit after the setting aside of the arbitral award. The court was without jurisdiction to embark on such an exercise. It has become functus officio as there was nothing left before it to try. See A. Savoia Ltd Vs Sonubi (2000) 12 NWLR (pt.632) 539; Arbico (Nig.) Ltd Vs NMT Ltd (2002) 15 NWLR (pt.989) 1.
It has been contended by the Appellant that the setting aside of the arbitral award, finally determines the rights and obligations of the parties under the contract and there is therefore nothing left to decide between the parties under the contract. This argument is founded on the fact that one of the grounds for setting aside of the award was that the contract was tainted with illegality and that this fact was never denied nor controverted by the Respondent as according to the Appellants that all their depositions and grounds upon which the application was brought was conceded to by the Respondent. It is therefore contended that the Respondent having admitted that the agreement from where all their rights and that of the Appellant’s flow is unenforceable in law, then there is nothing left to be adjudicated upon by the court as the agreement is unenforceable by order of the lower court made on the 31st May, 2004 setting aside the arbitral award. It is thus submitted that all the rights of the parties under the contract have been extinguished to the extent that neither the lower court nor any other court can adjudicate upon such rights as courts will refuse to enforce contracts that are tainted with illegality.
With due respect to the learned counsel, it appears learned counsel is labouring under a misconception of the effect of setting aside of an arbitral award on the grounds of Arbitrators misconduct only. As stated in this judgment, an application to set aside an arbitral award is an invitation to the court to render the whole arbitration proceedings null and void. The effect of the order is to deprive the award which is set aside of any legal effect so that the position is the same as if the award had never been made. The parties have been reverted to the status quo ante. In the instant case, the setting aside was founded inter alia among the following grounds:-
(a) That the arbitrator misconducted himself in that he based his award on unenforceable agreement, it, the agreement, being tainted with illegality.
(b) That the arbitrator misconducted himself in that he based his award on an agreement which is
operational upon happening of an event which event did not happen.
(c) The arbitrator misconducted himself in holding that 1st defendant breach its agreement with the plaintiff/respondent when there was no breach.
(d) The award was improperly procured in that it was based on illegal and unenforceable agreement etc.
The contention of the Appellants that these facts were neither denied nor controverted by the Respondents and therefore deemed admitted by the Respondents is of no moment. A counter-affidavit need not be filed where the averments in an affidavit are such as can be regarded as conclusions, legal arguments, prayers, Inferences or objections. Such averments do not raise facts that need to be controverted. Such facts should be simply regarded as extraneous; hence there will be no need to file a counter affidavit.
By virtue of Sections 86 and 87 of the Evidence Act, any affidavit filed for use in court is required to contain only a statement of facts and circumstances derived from the personal knowledge of the deponent or from information which he believes to be true. An affidavit should avoid matter of inference or conclusion or objection, prayer or legal argument. Consequently, where an affidavit is in the form of a conclusion, inference, legal argument, prayer or objection, it raises no fact which needs to be controverted but is simply regarded as extraneous to the determination of facts and dispute. See Gen & Aviation Services Ltd Vs Thahal (2004) 10 NWLR
(pt.830). In Bamaiyi Vs State (2001) 8 NWLR (pt.715) 270 the Supreme Court per Uwaifo, JSC, held that:-
“….prayers, objections and legal argument are matters that may be pressed by counsel in court and are not fit for a witness either in oral testimony or in affidavit evidence; while conclusion should not be drawn by a witness but left for the court to reach.”
Therefore, the fact that the Respondents did not file a counter affidavit did not amount to admission of the facts in the Appellants affidavit. The appellant’s affidavit offended Section 87 of the Evidence Act and thus the respondent is not obligated to file a counter affidavit. Issues of legality and condition precedent are subject to strict pleading rules that places an obligation on the Appellant to specifically particularise the illegal conduct in the statement of defence as required by Order 23 Rule 6 (1) & (2) of the FCT High court civil Procedure Rules, 2004.
In the case of Smith, Coney & Barrett Vs Becker, Gray & Co (1916) 2CH.86; the plaintiffs attempted to obtain an injunction to restrain the other party to a contract going to arbitration on a dispute which had arisen, one of the grounds being that the contract between the parties was illegal. The attempt to obtain the injunction failed because the court did not find that the contract was illegal. There was no pronouncement by the court that the contract was illegal or tainted with illegality. It is trite that the issue of illegality should be a conclusion for the court to make.
On the allegation of criminality in the agreement as contended in the Appellant’s affidavit, it is trite that criminal allegations must as a matter of law be proved beyond reasonable doubt. The mere mention of criminal allegation in an affidavit is not by itself sufficient to crown the agreement with illegality.
If the commission of a crime by a party to any proceeding is directly in issue in any proceeding civil or criminal, it must be proved beyond reasonable doubt. See Section 138(1) of the Evidence Act. see also Nwobodo Vs Onoh (1984) All NWLR 1; and Omoboriowo Vs Ajasin (1984) All NWLR 105. Mere admission by reason of failure to file a counter-affidavit does not suffice as an admission.
It is clear from the arbitration proceedings that the issue of illegality in the agreement has not been adjudicated by the Arbitrator. The arbitral award was set aside on the grounds inter alia of the Arbitrators misconduct for basing his award on an agreement which is operational upon happening of an event which event did not happen and also finding the 1st Appellant in breach when there was no such breach. This is stemming from the fact that the contingency that will bring Exhibit C3 into operation had not occurred. In other words, the cause of action had not arisen. Paragraph 13 of the supporting affidavit gave the condition precedent for Exhibit C3 to come into operation which is the granting of loan by City Express Bank Ltd. It was further averred in paragraph 14 of the affidavit that the said loan from City Express Bank was not granted. This in effect establishes the fact the rights of the parties has not been finally determined under the agreement.
Based on the foregoing, it is my view that the Order of the court of 31st May, 2004 does not determine the substantive rights and obligations of the parties under the contract agreement. Even though the lower court has become functus officio, as there was nothing left before it to determine other than to remit the matter back to arbitration before a different arbitrator or before the regular court for determination. This appeal therefore succeeds in part.
Each party to bear its own costs.
Other Citations: (2008)LCN/2907(CA)
