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

LawGlobal-Hub Lead Judgment Report

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.  

But the question is: was the decision of the Court of Appeal based on the construction and application of Section 5 of the English Arbitration Act, 1889, the provisions whereof are in all respects similar to the provisions of Section 6 of the Arbitration Act (Cap.13)? We think not.   The fact is that the objection which was raised on appeal by Nelson and Sons was not based on the exercise of jurisdiction by the court under Section 5 of the English Arbitration Act, 1889, nor was it a matter of the court appointing an arbitrator to go into the matters in difference between the parties in the case; but of the court, in terms of the application made to it, compelling Nelson and Sons to appoint an arbitrator themselves, which they were unwilling to do.

The judgment of the Court of Appeal was not based on the construction of Section 5 of the English Arbitration Act, 1889, because in the course of arguments in the appeal, the contention that the order at chambers which was affirmed by the Divisional Court was made under Section 5 or 6 of the Arbitration Act, 1889, was abandoned as inapplicable. The decision of the Court of Appeal was based on the construction of Section 1 of the Arbitration Act, 1889, which, incidentally, is in pari materia with the provisions of Section 3 of the Arbitration Act (Cap.13).

In this connection, it is instructive to draw attention to the manner in which the matter was dealt with by the Court of Appeal in England. In considering the appeal, Lord Esher, MR., who presided, said at p. 1092:-   “The question depends on the construction to be placed on the Arbitration Act, 1889. It is obvious, in my opinion, that this submission is not within Section 5 or 6 of that Act, because it is a reference to three arbitrators; and I think that the contention that either of those Sections applied was abandoned in the course of the argument. But it is said that the order that has been made is authorised by Section 1 of the Act.   Section 1 gives to the court in every case of a submission to arbitration the powers which the courts have before the Act in cases where a submission had been made a rule of court.”   

And further at p.1093, Lord Esher, MR., read the provisions of Section 1 of the Act, which are in the following terms:- “A submission, unless a contrary intention is expressed therein, shall be irrevocable, except by leave of the court or a Judge.” And then commented as follows:-   “Pausing there, that could not have meant that the agreement to refer was to be irrevocable, because it always was so. It means that the authority of the particular arbitrator is to be irrevocable.” Again Lord Esher, MR., read the remaining provisions of Section 1 of the Act, which are as follows:- “and shall have the same effect in all respects as if it had been made an order of court.”  

And again commented: “That is to say, it is to have the same effect in all respects as it would have had before this Act if it had been made a rule of court. The effect of making a submission a rule of court was, as I have said, to enable the assistance of the court to be obtained in carrying on the reference after arbitrators had been appointed, and to enable the award of the arbitrators to be enforced as if it had been a judgment of the court.

That being the construction of Section 1 of the Act of 1889, if there was no power to order the appointment of an arbitrator in such a case as the present prior to the Act, there is no power to make such an order now.   Even if the court had such a power, it would not necessarily show that there was power to order the party to appoint, as has been done in this case.”  

Generally, it may be said that the court was unanimous in holding that both the master and the Judge at chambers and the Divisional court were wrong and acted without jurisdiction in ordering Nelson and Sons to appoint an arbitrator, purporting, in so doing, to have acted under the Arbitration Act, 1889. The order was accordingly set aside. With the view of the court in that case, it is difficult to disagree, although whatever we may say in that respect must, of course, be regarded an obiter dictum as the point does not fall for decision in this appeal.

In our view, Re Smith and Service and Nelson and Sons is distiguishable quite clearly from the facts and circumstances and issue involved in the matter on appeal before us on at least two grounds.

In the first place, the learned trial Judge in the appeal under consideration exercised his powers under Section 6 of the Arbitration Act (Cap.13), which is in pari materia with Section 5 of the English Arbitration Act, 1889, and not, as did the master and the Judge at chambers in England under Section 1 of the English Arbitration Act, 1889. Section 1 of the English Arbitration Act 1889, be it noted, corresponds to Section 3 of the Arbitration Act, (Cap.13). In the second place, the learned trial Judge did not in any way order the appellants to appoint an arbitrator as was done by Master Manley Smith and Lawrence, J., at chambers in Re Smith and Service and Nelson and Sons.   In the circumstances, we have no doubt whatsoever in holding that Re Smith and Service and Nelson and Sons is irrelevant to the only issue which has been canvassed before us in this appeal.  

We think also that the learned counsel for the appellants was right in his submission that Heyman and Anor. v. Darwings Limited (1942) 1 All ER 337, which was cited and relied upon by learned counsel for the respondents in support of the judgment and order of the learned trial Judge was completely irrelevant to the issue in controversy in this appeal. It is certainly wholly unrelated to the issue.  

Heyman and Anor. v. Darwins Limited was concerned with an application for a stay of proceedings in consequence of the repudiation of a contract containing an arbitration clause. There, it was only Section 4 of the English Arbitration Act, 1889, which, incidentally corresponds to Section 5 of the Arbitration Act (Cap.13), which came up for consideration and was considered and determined by the court. The order made by the court was one for a stay of the action of the appellant therein, the court having held that the dispute between the parties in the suit in question was a dispute within the arbitration clause and therefore that the action ought to be stayed. And it was stayed.   We now turn to examine whether the learned trial Judge was right and had jurisdiction to have granted the application and made the order under Section 6 of the Arbitration Act (Cap.13)

The learned trial Judge in the case on appeal held that the application to him was properly made; that it was competent; and that he had full jurisdiction to appoint an arbitrator to go into the matter in difference between the parties and accordingly appointed an arbitrator  in the exercise of his powers under Section 6 of the Arbitration Act (Cap.13).

The relevant provisions of Section 6 of the Act read as hereunder set forth:- “6 (1) In any of the following cases:- (a) where a submission provides that the reference shall be to a single arbitrator, and all the parties do not after differences have arisen concur in the appointment of an arbitrator; (b) (c) (d)    Any party may serve the other parties or arbitrators, as the case may be, with a written notice to appoint an arbitrator, umpire or third arbitrator.   (2) If the appointment is not made within seven clear days after the service of the notice, the court or a Judge may, on application by the party who gave the notice, appoint an arbitrator, umpire or third arbitrator, who shall have the like powers to act in the reference and make an award as if he had been appointed by consent of all parties.”   On the facts, there is no dispute that the Policy of Insurance covering the Peugeot 404 family taxi car contained a valid arbitration clause or what is known technically as a “submission”, which is defined under Section 2 of the Arbitration Act (Cap.13) as “a written agreement to submit present or future difference to arbitration, whether an arbitrator is named therein or not.”

There is no doubt that such a submission is to be found in clause 8 of the agreement, Exhibit ‘B’.   It is also common ground that the requisite valid notice in terms of Section 6 of the Arbitration Act (Cap.13) was duly and promptly served.

The appellants, instead of taking appropriate steps to concur in the appointment of an arbitrator, completely ignored the notice; repudiated the claims of the respondents; and maintained that the respondents could not claim a higher interest or right in the agreement, Exhibit ‘B’ than Mark Ogunfolu Kayode, the hirer of the motor vehicle insured.   In those circumstances, it seems to us plain that the learned trial Judge was right to have granted the application of the respondents in the exercise of his powers under Section 6 (2) of the Arbitration Act (Cap.13) since differences had arisen between the parties and due notice had been served on the appellants in terms of the provisions of Section 6(1) of the Arbitration Act (Cap.13).

In the submission in the agreement, Exhibit ‘B’, provision was made for a single arbitrator to be appointed in writing but in the event of disagreement over a single arbitrator then two arbitrators were to be appointed. The submission therefore falls four squares within the terms of the provisions of Section 6 of the Arbitration Act (Cap.13), the language of which is plain and unambiguous and must therefore be enforced, which, in our view, was what the learned trial Judge did.   It is interesting to note that in England at one time in a similar situation, the view was that the court had no discretion at all and could not refuse to appoint an arbitrator in a proper application made to it. That was the view expressed by the Court of Appeal in Re Eyre and the Corporation of Leicester (1892) 1 QB 136. The decision of that court was based on the construction of Section 5 of the English Arbitration Act, 1889, the relevant provisions of Section 6 of the Arbitration Act (Cap.13) and read as follows:-   “5. In any of the following cases:- (a) Where a submission provides that the reference shall be to a single arbitrator, and all the parties do not after differences have arisen concur in the appointment of an arbitrator; (b) (c) (d)   any party may serve the other parties or arbitrators, as the case may be, with a written notice to appoint an arbitrator, umpire, or third arbitrator.    If the appointment is not made within seven clear days after the service of the notice, the court or Judge may, on application by the party who gave the notice, appoint an arbitrator, or third arbitrator, who shall have the like powers to act in the reference and make an award as if he had been appointed by consent of all the parties”.   In that case a contract for the execution of certain sewerage works between a local authority called Leicester Corporation and a contractor named F. Eyre, provided for the reference of any dispute or difference which should or might arise to a single arbitrator. Disputes or differences having arisen between the contractor and Leicester Corporation, the contractor, through his Solicitors, writing to the Town Clerk of Leicester Corporation made proposals to the Corporation with regard to the selection of an arbitrator. He pointed out that under the Arbitrator Act, 1889, it would be necessary that there should be an  application to a Judge to appoint one; that before making an application to a Judge he wished to inquire whether the Corporation thought it possible to agree upon an arbitrator; and that the Corporation might either give him half-a-dozen names from which to select one or he would give half-a-dozen names for the Corporation to select from. The Town Clerk, writing on behalf of the Corporation in answer to the proposals, stated that he was unable to assent to the contractor’s views or to acquiesce in the propositions which he had made.   The contractor’s solicitors thereupon served on the Town Clerk a written notice addressed to the corporation and signed by the contractor himself. The notice read in part as follows:-   “Take notice that you are hereby required to concur with me, the undersigned, on the appointment for a sole arbitrator to act on the above mentioned matter for the purposes of the submission to arbitration made by certain articles of agreement dated, etc., etc., pursuant to and in accordance with Clause 39

Other Citation: (1976) LCN/2190(SC)