Royal Exchange Assurance V. Bentworth Finance (Nig.) Ltd (1976)

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SIR UDO UDOMA, JSC. 

There is only one point of law which was raised and argued before us and which calls for decision in this appeal. The point is of considerable importance and appears to have been raised in this court for the first time in this form since the promulgation of the Arbitration Act (Cap.13) in 1914, which is surprising. It relates to the power exerciseable by the court under Section 6 of the Arbitration Act (Cap.13); and concerns a hire-purchase transaction.  

The matter now before us on appeal arose in this way: On 26th June, 1965 Benworth Finance (Nigeria) Limited (hereinafter in this judgment to be referred to as the respondents) carrying on business as a hire-purchase company in Lagos entered into a hire-purchase agreement, Exhibit ‘A’, in these proceedings with one Mark Ogunfolu Kayode in respect of a Peugeot 404 family taxi car. The respondents were in the agreement, Exhibit ‘A’, described as the owners of the Peugeot 404 family taxi car.

In terms of the agreement, Exhibit ‘A’, the inclusive cost of the car together with the insurance premium amounting to the sum of £158:18/- came to the total sum of £1321:18/-. Of that sum Mark Ogunfolu kayode, the hirer, paid the initial deposit of the sum of £661:18/- and agreed to liquidate the balance by eight instalments of the sum of £98:6:9d per mensem.   Mark Ogunfolu Kayode undertook in the agreement, Exhibit ‘A’, to insure the Peugeot 404 family taxi car immediately on the execution of the said agreement, and during the continuance of the hiring to keep the same insured against all the usual risks including loss or damage by fire, theft and accident or such other risks as the owners might require by means of a full comprehensive policy without restriction or excess and to punctually pay all premiums and sums of money necessary for effecting the said insurance and to pay to the owners on demand any sums expended by them in that behalf. The hirer further agreed that any ‘monies’ including rebate or premium becoming payable under the insurance should be paid to the owners; and irrevocably authorised the owners to give a good discharge therefore and to apply the same in satisfaction of the agreement, Exhibit ‘A’, as they might in their unfettered discretion deem proper.   In pursuance of the agreement, Exhibit ‘A’, Mark Ogunfolu Kayode promptly insured the Peugeot 404 family taxi car by taking out a comprehensive Insurance Policy, Exhibit ‘B’, in these proceedings with the Royal Exchange Assurance of Broad Street, Lagos (hereinafter in this judgment to be referred to as the appellants). The premium of the sum of £158:18/- was also promptly paid by the respondents as owners of the Peugeot 404 family taxi car.

As a result the duplicate copy of the Policy of Insurance, Exhibit ‘B’, was delivered thereon as “Endorsement No.28” the words following:-   “It is hereby declared and agreed that Bentworth Finance (Nigeria) Ltd. Ibadan (hereinafter referred to as the owners) are the owners of the Motor Vehicle described in the Schedule of this Policy and that the said Motor Vehicle is the subject of a Hire-Purchase Agreement made between the owners on the one part and the insured on the other part and it is further declared and agreed that the said owners are interested in any monies which but for this endorsement would be payable to the insured under this Policy in respect of the loss of or damage to the said Motor Vehicle (which loss or damage is not made good by repair reinstatement or replacement) and such monies shall be paid to the owners of the Motor Vehicle and their receipt shall be a full and final discharge to the company in respect of such loss or damage.   Save as by this endorsement expressly agreed nothing herein shall modify or affect the rights or liabilities of the insured or the company respectively under or in connection with this policy or any term provision condition thereof.”

That endorsement bore the official stamp of the appellants signifying their approval of, and consent to be bound by it. Then on 13th January, 1966, the Peugeot 404 family taxi car was involved in an accident. It was damaged beyond repairs.   The respondents consequently lodged a claim with the appellants under the policy of Insurance, Exhibit ‘B’. The appellants immediately repudiated such a claim on the ground, as disclosed in their letter of 30th March, 1966, that the cause of the accident whereby the Peugeot 404 family taxi car was completely damaged was not covered by the Policy of Insurance, Exhibit ‘B’. Indeed they maintained that the cause of the accident was excluded under the said Policy.   Thereupon the respondents served on the appellants notice dated 17th August, 1966, requesting that since differences had arisen between them in connection with the Policy of Insurance, Exhibit ‘B’, that the appellants should concur in the reference of the matters in difference between them to, and in the appointment of an arbitrator; and that if the appellants should fail to do so within seven days they, the respondents would apply to the High Court of Lagos for the appointment of an arbitrator. The appellants defaulted.

They ignored that notice.   The time stipulated in the notice having expired, the respondents by motion dated 27th August, 1966, in the High Court of Lagos – Suit No.M/179/66 applied to the court to exercise its powers under Section 6 of the Arbitration Act (Cap.13) by making an order appointing an arbitrator to enquire into the matter in difference between the respondents and the appellants and to make an award thereafter in respect of the respondents’ claim under the Policy of Insurance, Exhibit ‘B’.  

The High Court of Lagos (Sowemimo, J., as he then was), after due hearing and a review of the facts and circumstances of the case granted the application; and ordered accordingly. The appellants being dissatisfied with the judgment and order of the High Court have appealed to this court.   As already stated, only one point of law was argued before us. Mr. Cole, learned counsel for the appellants, in a rather breezy and facile but attractive style attacked the judgment and order of the learned trial Judge. He contended that the learned trial Judge had no jurisdiction under Section 6 of the Arbitration Act (Cap.13) to have made the order which he made by appointing a named arbitrator to go into the matter in difference between the respondents and the appellants on the application of the respondents.

He submitted that the court has no jurisdiction to compel a party to a submission to go to arbitration and that the learned trial Judge erred in law in not holding that the court could not enforce specific performance of an agreement to refer matters in difference to arbitration because, in his submission, a court cannot compel an unwilling party in a dispute to appoint an arbitrator.   It was the learned counsel’s contention that Section 6 of the Arbitration Act (Cap.13) does not cover a case where a party to a submission refuses to go to arbitration but only such cases in which both parties are ready and willing to go to arbitration but cannot agree as to the person to act as or to be appointed arbitrator.  

Learned counsel further submitted that it would be incompetent for a court to intervene and to appoint an arbitrator for a party unwilling to take part in an arbitration even though such a party was a party to a submission; and that a court intervening to appoint an arbitrator in such circumstances and purporting to do so under Section 6 of the Arbitration Act (Cap.13) as the learned trial Judge had purported to do in the case on appeal would be acting without jurisdiction.

In support of these submissions learned counsel cited and relied on Re: Smith and Service and Nelson and Sons (1886-1890) All ER Rep. 1091 (C.A.), which he maintained is a decision which was based on the construction of Section 5 of the English Arbitration Act, 1889 (52 and 53 Vict. C.49), which is in pari materia with Section 6 of the Arbitration Act (Cap.13) under which the learned trial Judge had purported to act in granting the application and appointing the arbitrator.   It is necessary to examine Re Smith and Service and Nelson and Sons with some care as learned counsel for the appellants placed so much reliance on it. The English Act on which the decision was based was, of course, the Arbitration Act, 1889. The decision in the case was given by the Court of Appeal in England on 16th July, 1890 soon after the passing of the Act by the English Parliament.

The court which gave the decision in the case was a strong court consisting of Lord Esher, MR., Lindley and Bowen, LJJ., and if learned counsel’s submission is right that the decision was based on the construction of Section 5 of the English Arbitration Act, 1889, the provisions whereof are the same as the provisions of Section 6 of the Arbitration Act (Cap.13); and that the issue decided was the same as has been canvassed before us in this appeal, then at least the decision should have a very strong persuasive influence on this court. It would be difficult, indeed, for this court to ignore it, although not necessarily bound by it.  

The case itself arose out of a charter party which contained a clause “referring any dispute which might arise to three arbitrators, one to be appointed by each party, and the third by the two arbitrators so appointed.” Nelson and Sons subsequently refused to carry out their contract on the ground that the vessel concerned in the charter party did not arrive at the port named until after the appointed day. Smith and Service thereupon appointed an arbitrator under the reference clause in the charter party, and served a notice upon Nelson and Sons calling upon them to appoint another arbitrator within seven days in accordance with the agreement.     

As Nelson and Sons failed to comply with the notice, Smith and Service took out a summons at chambers for an order to compel Nelson and Sons to appoint their own arbitrator in compliance with the terms of their agreement. An order was accordingly made by the master at chambers. The order was subsequently affirmed by the Divisional Court. Nelson and Sons appealed to the Court of Appeal. The order made by the Master at chambers and affirmed by the Divisional Court was set aside by the Court of Appeal on the ground of want of jurisdiction. That seems to fit in four squares with the submissions of learned counsel for the appellants.