The Owners Of The M. V.lupex V. Nigerian Overseas Chartering And Shipping Limited (2003)

LAWGLOBAL HUB Lead Judgment Report

MOHAMMED, J.S.C.

This is an appeal from the decision of the Court of Appeal, Lagos Division. The plaintiff, who is respondent in this appeal, claims damages for the loss it suffered as charterer of the defendant’s ship ‘LUPEX’ under a charter-party dated, 11th April, 1991. The loss was in consequence of the defendant’s breaches of the said charter-party. The defendant is the appellant in this appeal. In an action which the respondent filed against the appellant in the Federal High Court, Lagos, the company claimed for the following reliefs:

“1. Balance due to the plaintiffs on final hire statement …… US $ 138,480.64

2. Loss of 13 days hire due to willful delays by the defendants ….. US $ 62,400
3. Loss of hire paid when defendants wrongfully withdrew the vessel from charter in Brazil without justification

for 47 days and bunkers consumed during the said period ….US $ 324,770

4. Fees paid to the defendants’ Nigerian agents at the defendants’ request on the 22nd June, 1991 …….. US $ 56,700
5. Fees paid to the defendants’ Brazilian agents, Messrs Buarque et Cia, on the 5th July, 1991….. US $ 50,034.05
6. Interest for one year at 35% per annum ….. US $221.200

US $853.585.29

Total Claim US Dollars 853,585.20 together with interest at the rate of 35% per annum until the date of judgment and costs.”

After filing the suit, the respondent applied through a motion ex parte for the arrest of the vessel (M.V. LUPEX) which at that time had berthed at the port of Warri. The trial High Court granted the order as prayed. On being aware of the order given by the court directing for the arrest of the ship the appellant went to court and filed a motion on notice and applied for the following orders:

“1. Setting aside the order of this Honourable Court dated 13th October, 1992 for the arrest of the vessel M. V. LUPEX, alternatively;

2. For the release of the vessel M. V. LUPEX from the arrest of this Honourable Court unconditionally or upon such terms as this Honourable Court may direct.
3. Stay of the proceedings in this suit sine die.”

The learned trial Judge, in his ruling, considered the submission of learned counsel for the appellant, Mr. Candide Johnson, that the court should have declined jurisdiction in view of the provisions of the Arbitration and Conciliation Act, Cap. 19, Laws of the Federation of Nigeria, 1990. The learned Judge was also referred to the charter-party agreement and the cases of K.S.U.D.B. v. Fanz Construction Limited (1990) 4 NWLR (Pt.142) page 1 at 33 and Sonnar Nigeria Ltd. v. Partenreedri M. S. Nordwind (Owners of the Ship M. V. Nordwind) and Another (1987) 3 NWLR (Pt. 66) 520. Referring to his application for setting aside the order of arrest of the vessel M. V. LUPEX, the learned counsel for the appellant submitted that when the order was given through an ex parte application not all the relevant facts were known to the court. The court was not aware of the existence of arbitral tribunal in London. Learned counsel then urged the trial court to set aside the order of arrest of the ship. The motion was opposed strongly by learned counsel for the respondent, Mr. Mbanefo, SAN.

The learned trial Judge considered all the submissions made before him and held that he had jurisdiction to entertain the action filed by the respondent, and declined to stay proceedings. On the order of arrest of the ship, the court gave a condition that the appellant should supply a bank guarantee to the tune of $735,000.00 US Dollars or its equivalent in Naira before the ship could be released.

Dissatisfied with this ruling the appellant appealed to the Court of Appeal. The Court of Appeal considered all the issues canvassed before it and dismissed the appeal. The appellant has now come before this court, armed with three grounds of appeal, challenging the decision of the court below. Learned counsel for the appellant identified the following three issues as relevant for the determination of the appeal:

“1. Whether or not the Court of Appeal is bound to stay proceedings where parties prior to the action had voluntarily submitted to arbitration in compliance with their contract or whether the evidence of the plaintiff in this case is sufficient in law to justify the exercise of the court’s discretion to refuse to order a stay of proceedings under section 5 Arbitration and Conciliation Act.

2. Whether the court, when faced with an application for stay of proceedings in favour of International Commercial Arbitration as agreed to by parties, must exercise its discretion in line with the Convention for the Recognition and Enforcement of Foreign Arbitral Awards (Second Schedule to the Arbitration and Conciliation Act), particularly Article II rule 3 thereof.
3. Whether the ratio decidendi of the Supreme Court in Sonnar (Nigeria) Limited & Anor. v. Nordwind & Anor. (1987) 4 NWLR (Pt. 66) 520 (hereinafter referred to as the Nordwind) can be applied to the facts of this case.”

Learned counsel for the respondent on his part submitted, in the respondent’s brief, that the only issue arising for the determination of the appeal is whether in the circumstances of the case the Court of Appeal rightly affirmed the decision of the learned trial Judge in exercising his discretion to refuse the appellant’s application for stay of the proceedings in the suit in consequence of arbitral proceedings pending in London between the parties. In other words, only one issue has been identified by the respondent for the determination of this appeal. I think the respondent’s counsel is right in formulating the single issue for the determination of this appeal. It is enough to cover the points of argument between the parties.

The real issue in dispute between the parties which concerns this appeal is the application filed by the appellant, requesting the trial High Court to stay proceedings of the action filed by the respondent in view of the agreement the two parties entered in clause 7 of the charter-party, which reads:

“7. That the parties agreed inter alia on arbitration in London under English Law in the event of any dispute.”

Learned counsel for the appellant, Babajide Koku, referred to a number of authorities, both Nigerian and foreign, to buttress his argument that once an arbitration clause is retained in a contract which is valid and the dispute is within the contemplation of the clause, the court should give regard to the contract by enforcing the arbitration clause. He referred to Heyman and Another v. Darwins Limited (1942) AC 356. I have looked at Heyman’s case and the facts, in a nutshell, show that a dispute arose between two contracting parties and an arbitration clause in the contract provided that “if any dispute shall arise between the parties hereto in respect of this agreement or any of the provisions herein contained or anything arising here out, the same shall be referred to arbitration in accordance with the provisions of the Arbitration Act, 1889”. A dispute arose between the parties and the appellants commenced an action against the respondents claiming (a) a declaration that the respondents had repudiated and or evinced an intention not to perform the contract and (b) damages. The respondents denied that they repudiated the contract and applied to have the action stayed in order that it might be dealt with under the arbitration clause. The trial High Court Judge, Cassels, J. refused to grant a stay. The Court of Appeal allowed an appeal holding that Cassels, J. had wrongly exercised his discretion. On appeal to the House of Lords the decision of the Court of Appeal was affirmed. The House of Lords held that the Court of Appeal was right in overruling the discretion exercised by the learned trial Judge in declining to grant a stay.

It may be argued that Heyman’s case was a decision in England which did not concern a foreign tribunal. However, in Dicey & Morris, The Conflict of Laws, at page 255, rule 31, it has been provided as follows:

“Where a contract provides that all disputes between the parties are to be referred to the exclusive jurisdiction of a foreign tribunal, English Courts will stay proceedings instituted in England in breach of such agreement, unless the plaintiff proves that it is just and proper to allow them to continue”.

Learned counsel for the respondent argued that the trial High Court exercised its discretion in refusing to stay proceedings and it is trite that an appellate court may interfere with such a decision only when it is shown that the trial court had acted on some wrong principles of law or a misapprehension of the facts or that the exercise is patently wrong. He referred to Sonnar (Nig.) Ltd. v. Nordwind (1987) 4 NWLR (Pt.66) 520 at 530. Eso, JSC (as he then was) wrote the lead judgment in Sonnar’s case. He referred to the tests set out by Brandon, J. in the case of The Eleftheria. Those tests have been reproduced in that judgment as follows:

“1. Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the English Court, assuming the claim to be otherwise within the jurisdiction, is not bound to grant a stay but has a discretion whether to do so or not.

2. The discretion should be exercised by granting a stay unless strong cause for not doing so is shown.
3. The burden of proving such strong cause is on the plaintiffs.
4. In exercising its discretlon, the court should take into account all the circumstances of the particular case.
5. In particular, but without prejudice to (4), the following matters, where they arise, may be properly regarded:

(a) In what country that the evidence on the issue of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the English and foreign courts.

(b) Whether the law of the foreign court applies and if so, whether it differs from English law in any material respects.

(c) With what country either party is connected and how closely.

(d) Whether defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages.

(e) Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they would:

(i) Be deprived of security for that claim;

(ii) Be unable to enforce any judgment obtained;

(iii) Be faced with a time-bar not applicable in England; or

(iv) For political, racial, religious or other reasons, be unlikely to get a fair trial.”

It could be seen, in that case, that Eso, JSC concluded that where the granting of a stay would spell injustice to the plaintiff, as where the action was already time-barred in the foreign court and the grant of a stay would amount to permanently denying the plaintiffs any redress, justice is better served by refusing a stay than by granting one. As a matter of fact this court in Sonnar’s case agreed to reverse the decisions of both the High Court and the Court of Appeal because it was established during the hearing of the appeal that if the parties were sent to Germany which was the country adopted by the parties in the Bill of Lading as the place of litigation in regard to any dispute arising between them the action would be time-barred under the German Law.

Sonnar’s case could easily be distinguished from the case in hand. The facts which have been averred by the appellant, in the appellant’s affidavit, in support of the application for stay of proceedings in the High Court clearly show that the respondent had in fact submitted to the jurisdiction of the English tribunal in London. The respondent had filed a counter-claim against the appellant’s affidavit stating its claim before the tribunal there. In the case in hand, in the affidavit filed in support of the motion for stay of proceedings before the trial High Court, the appellant explained all the facts about the respondent’s voluntary submission to arbitration before the tribunal in London. I will reproduce below some of the relevant paragraphs of the affidavit which explain the points I have disclosed above:

“7. That the parties agreed inter alia on arbitration in London under English law in the event of “any dispute”.

46. That the said proceedings are continuing at present and conduct of the plaintiff’s case in the proceedings aforesaid is entrusted to the distinguished city firm of Ince and Co.
47. That the plaintiff has submitted to the said arbitration by full participation therein particularly by the filing of a counter-claim against the owners on the 14th January, 1991 in the sum of US$147,205.96 by final submission in the arbitration on 29th September, 1992.
48. That in applying for the order of arrest herein the plaintiffs suppressed the fact of the pending proceedings and misrepresented the documents relevant to the application.
49. That the present proceedings are intended to undermine the pending proceedings in which the plaintiff has had and retains all means to present its case.
50. That neither these proceedings nor the purported claim which is made by the plaintiff in London is brought for any genuine purpose.”

These uncontroverted facts explain clearly that by submitting to arbitration the respondent had compromised its right to resort to litigation in court. The averments in the appellant’s affidavit show that the arbitration proceedings had commenced and the respondent had entered appearance before the tribunal. The two courts below, I believe, had no difficulty in understanding the purport of clause 7 of the charter-party agreement which the parties signed referring their disputes to arbitration instead of going to court.

An arbitration clause is a written submission agreed by the parties to the contract and, like other written submissions it must be construed according to its language and in the light of the circumstances in which it is made. The parties in this case agreed to refer their disputes to arbitration in London under the English law. Unlike in Sonnar’s case where, on the grounds of balance of convenience, the proceedings in Germany were time-barred, in this case, the tribunal in England had started hearing the dispute and parties have begun to present their respective cases before it.

The court has power to stay proceedings when an application is filed before it. See section 5 of Arbitration and Conciliation Act (supra). The power is indeed discretionary and the trial High Court exercised its discretion and refused to grant a stay of the proceedings. On appeal the Court of Appeal had affirmed that decision.

It is settled law that an appellate court does not interfere with the discretion of a trial court unless when it is shown that the trial court has acted on some wrong principles of law or a misapprehension of the facts or that the exercise is patently wrong.

Grounds for granting a stay of proceedings in cases where parties agree to resort to arbitration are many. Where the parties agreed that “all disputes that may arise between them in consequence of this contract having been entered into shall be referred to arbitration” is held to be a strong ground for granting a stay of proceedings. See Re Hohenzollern etc. Arb. (1886) 54 L.T. 596 and The Union of India v. E. B. Aaby’s Rederi A/S (1974) 2 All ER 874. In the case of the Chaparral (1968) 2 Lloyd’s Rep. 158 at 164 Lord Diplock dealt with the importance attached by the courts to the affirmation of voluntary agreement of parties and said as follows:

“Where parties have agreed to submit all their disputes under a contract to the exclusive jurisdiction of a foreign court, I myself should require very strong reasons to induce me to permit one of them to go back on his word….”

Coming back home, I think the comments made by Ephraim Akpata, JSC in the book “The Nigerian Arbitration Law” is apt on the issue of staying proceedings where parties have agreed to refer their dispute to arbitration in a contract. He expressed his opinion in the following exposition:

“That the power to order a stay is discretionary is not in doubt. It is a power conferred by statute. It however behoves the court to lean towards ordering a stay for two reasons; namely;

a) The provision of section 4(2) may make the court’s refusal to order a stay ineffective as the arbitral proceedings “may nevertheless be commenced or continued” and an award made by the arbitral tribunal may be binding on the party that has commenced an action in court.

b) The court should not be seen to encourage the breach of a valid arbitration agreement particularly if it has international flavour. Arbitration which is a means by which contract disputes are settled by a private procedure agreed by the parties has become a prime method of settling international commercial disputes. A party generally cannot both approbate and reprobate a contract. A party to an arbitration agreement will in a sense be reprobating the agreement if he commences proceedings in court in respect of any dispute within the purview of the agreement to submit to arbitration”.

Judges and courts exercise their discretion in accordance with rules of law and justice and not according to private opinion. An exercise of discretion is a liberty or privilege to decide and act in accordance with what is fair and equitable under the peculiar circumstances of the particular case, guided by the spirit and principles of law. Where parties have chosen to determine for themselves that they would refer any of their dispute to arbitration instead of resorting to regular courts a prima facie duty is cast upon the courts to act upon their agreement. See Willesford v. Watson (1873) 8 Ch. App. 473.

Taking into consideration all what I have considered above in this judgment, it is crystal clear that the trial High Court could only have acted judicially and judiciously if it exercised its discretion by ordering a stay of proceedings in the case in hand. It is abundantly clear that the trial court had acted on wrong principles of law and that it misapprehended the facts of this case when it refused to grant the appellant’s application for stay of proceedings of the action filed before it by the respondent. The court below is therefore in error to affirm the decision of the trial Federal High Court in refusing to grant a stay of proceedings. This is a clear case which deserves the interference with trial court’s discretion by the Court of Appeal.

In the result, this appeal succeeds and it is allowed. The judgment of the Court of Appeal in which it affirmed the ruling of the Federal High Court, Lagos refusing to stay proceedings in this case is hereby set aside. The proceedings before the trial Federal High Court are hereby stayed sine die. The appellant is entitled to the costs of this appeal which I assess at N10,000.00 and the costs of the appeal at the Court of Appeal at N1,500.00.

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SC.21/2000