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SAKAMORI CONSTRUCTION (NIG) LTD V. LAGOS STATE WATER CORPORATION
SAKAMORI CONSTRUCTION (NIG) LTD V. LAGOS STATE WATER CORPORATION [2021] LPELR-56606(SC)
Facts Of The Case
The Appellant instituted Suit LD/1146/2009 at the High
Court of Lagos State in 2009 claiming in the main, the
sum of N462,068,741.92 as outstanding payment
arising from the contract for supply and laying of
secondary and tertiary networks systems, under the
Respondent’s water supply expansion programme
between 1994 and 1999. The trial Court gave judgment
in favour of the Appellant, awarding the sum of
N462,068,741.92 and 10% post judgment interest. The
Court held that the affidavit evidence and exhibits
annexed by the Appellant were not challenged and thus,
deemed admitted. The Respondent appealed to the
Court of Appeal, which set aside the judgment of the trial
Court on the ground that the trial Court had no
jurisdiction to entertain the matter, and the parties were
referred to arbitration in line with the terms of the
contract between them. The Appellant appealed to the
Supreme Court
Relevant Issues/Decision Of The Supreme Court
The first issue the Supreme Court considered was
whether the Court of Appeal should have made an order referring the parties to arbitration. The Supreme Court held that the dispute which parties to an arbitration
agreement consent to refer to an arbitration must
consist of justifiable issues triable civilly, and a court or
tribunal should only give effect to an arbitration clause
where the dispute is unequivocally within the ambit and
contemplation of the arbitration clause in question. The
Supreme Court found that the arbitration clause
stipulated for the “Engineer” to be the settler (arbiter) of
dispute between the respective parties, and that this
indicates that the dispute envisaged to come under the
arbitration clause.
The Supreme Court held that the dispute in the instant
appeal which arose from an admitted debt did not fall
within the purview of the dispute envisaged under the
parties’ arbitration agreement, especially when the debt
was consistently acknowledged and admitted by the
Respondent. The Supreme Court also held that the order
of the Court of Appeal referring the parties to arbitration,
a relief the Respondent did not seek, is inconsistent with
the principle of law that courts only grant reliefs sought.
In summary, the Supreme Court held that the Court of
Appeal ought not to have referred parties to arbitration.
The second issue the Supreme Court considered was
whether the Court of Appeal was right when it held that
the trial Court did not have the jurisdiction to entertain
the Appellant’s case. The points of arguments for the
Respondent were that the trial Court failed to dispose of
the Respondent’s pending preliminary objection
challenging the jurisdiction of the trial Court, and the
presence of an arbitration clause in the agreement
exhibited in the Respondent’s preliminary objection. On
the preliminary objection, the Supreme Court found that
from the record and by the admission of the Respondent,
no such application was pending prior to the delivery of
the judgment of the trial Court. On the failure to give
effect to the arbitration clause, the Supreme Court found
that the Appellant’s claim before the trial Court was
essentially a liquidated money demand for a debt which
the Respondent acknowledged several times, and that
the Appellant’s statement of claim was not premised on
any document containing the arbitration agreement. As
such the Court of Appeal ought not to have relied on the
arbitration agreement to hold that the trial Court lacked
the jurisdiction to entertain the Appellant’s claim.
On whether the Respondent ought to have filed a
defence and/or counter affidavit to the Appellant’s
processes at the trial Court, the Supreme Court held that
an agreement to submit disputes to arbitration does not
automatically oust the jurisdiction of the court. Thus,
where a defendant does not apply for stay of
proceedings or the court refuses the stay the court would
proceed to entertain the claim. The Supreme Court then
held that the action of the Respondent in not filing any
processes in response to the Appellant’s originating
process and also not responding to the application for
summary judgment, only until the day of ruling on the
application, was an attempt to frustrate the proceedings
of the trial Court. Interestingly, the Supreme Court held
that nothing in Order 22 Rule 2(1) of the High Court of Lagos State (Civil Procedure) Rules 2004 (which is in pari materia with Order 24 rule 2(1) of the 2019 Rules)
which allows any party to raise a point of law in his
pleading, contradicts section 5 of the Arbitration and
Conciliation Act which provides for stay of proceedings of
a matter the subject of which is a subject matter of an
arbitration agreement. Thus, a party could file his
defence to an action and raise the existence of an
arbitration agreement in the defence.
Brief Comments
The decision of the Supreme Court in this case that
failure to pay an admitted liability is not a dispute
referrable to arbitration pursuant to an arbitration
clause, is a reiteration of the position of the Supreme
Court in a line of cases including K.S.U.D.B. v. Fanz
Construction Ltd [1990] 4 NWLR (Pt.142) 1 at 33 para B.
The decision on the options available to a defendant in
an action filed in breach of an arbitration agreement, will
allow parties who seek to stay proceedings pending
reference to arbitration, to file their defence pleading the
existence of the arbitration agreement, without waiving
their right to have the proceedings stayed. This decision
is a deviation from the position maintained by the Su
preme Court in cases such as Obembe v. Wemabod
Estate Ltd [1977] LPELR-2161(SC), 19-20, paras F-C,
where the Supreme Court had held that in order to get a
stay, a party must not take any step in the proceedings,
and that any application at all made to the court, and
specifically filing a defence amounts to taking steps in
the proceedings.
The decision provides fresh clarity on the steps to be
taken by the parties without jeopardising their
preference for a staying the court proceedings in aid of arbitration.
We are pleased to have represented Vertex Agro Limited; one of the major Agro Allied Company in northern Nigeria in a contentious commercial litigation involving a Turn-key Project on an EPC basis for the supply and installation of 500KVA, 750KVA and subsequently a 1000KVA transformer respectively, before the Niger State High court, Suleja Judicial Division.
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