BHARYA ENGINEERING AND CONTRACTING CO

IN THE HIGH COURT OF THE UNITED REPUBLIC OF TANZANIA COMMERCIAL DIVISION AT PAR ES SALAAM COMMERCIAL CASE NO. 105 OF 2023 BETWEEN BHARYA ENGINEERING AND CONTRACTING CO.LTD................. PLAINTIFF VERSUS PRINCE GENERAL INVESTMENT LIMITED................................... DEFENDANT RULING Date of Last Order: 25/04/2024 Date of Ruling: 07/06/2024 GONZI, J. From the Plaint, the Plaintiff sued the Defendant in respect to a claim of USD 199,932.00 equivalent to TZS 506,227,824.00 being loss suffered by her for the Defendant's unlawful act of violating terms contained in the transportation contract entered between them in the past, specific and general damages and interest thereof. The Plaintiff prayed for Judgment and Decree against the Defendant as follows: i. That this Honourable Court to order the Defendant to make an immediate payment of USD 199,932.000 which is equivalent to TZS 506,227,824.00 to the Plaintiff being the amount calculated on overconsumption of fuel and shortage of coal at the 1 offloading point and which per the transportation contract the Plaintiff is entitled to recover. ii. Interest of 7% per annum at Court's Commercial rate from date of Judgment till the date of full payment of the amount in item (i) above. iii. General damages to be assessed by this Honourable Court. iv. Costs of this suit to be borne by the Defendant. v. Any other relief(s) this Honourable Court deem just and fit to grant. When served with the Plaint, the Defendant in her Written Statement of Defence refuted the Claims and raised a Preliminary Objection in law to the effect that: The suit is filed and lodged improperly in the wrong avenue contrary to the Law of Contract Act, Revised Edition of 2019, Cap 345 under section 2(l)(e) and Section 2(1) and section 10 of Cap 345, the Court has no Jurisdiction to entertain this matter. The Defendant therefore prayed for the suit to be dismissed. 2 The Court granted leave to Counsel for both sides argue the preliminary objection by way of written submissions. The Defendant was represented by Ms. Lilian Nkwimba Shija, learned Advocate. The Plaintiff was represented by Ms. Loveness Ngowi,, learned Advocate. In her submissions in support of the Preliminary Objection, Ms. Lilian Shija, learned Advocate submitted that the suit is premised on a contract executed by the parties on 14th September, 2022 which involved the business of transportation services. She argued that Clause 8 of the Transportation Contract provides that the parties submitted themselves irrevocably to negotiate and settle amicably for adjudication in whichever dispute between them. The dispute resolution Clause No.8 is contained in the Annexture M-l and D-l respectively and provides: " The parties agree to negotiate and/or to settle amicably and in good faith any and all claims, controversies, differences and /or disputes, at any time, arising out of or in connection with this agreement including any question regarding its existence, interpretation, validity, termination or any breach thereof." Ms. Lilian Shija learned Advocate submitted that the filing of this case in Court, without pursuing the agreed dispute resolution process, is a 3 violation of that agreement and therefore the court is barred to try the suit. She referred the Court to the cases of Amani Nuru Mti wa Uzima versus CRDB Bank Pic & Kimbembe Auction Mart Ltd, Land Case No.7 of 2020, High Court, Mbeya sub-registry where it was held that "as a matter of general principle, where the parties have agreed to refer to a forum of their choice, the court would direct that the parties should go before the agreed forum/' Ms. Lilian Shija also cited the cases of Sunshine Furniture Co. Limited versus Maersk China Shipping Company Limited, Civil Appeal No.98 of 2016 decided by the Court of Appeal of Tanzania, wherein it was held that choice of forum does not oust jurisdiction of the Court but the parties in it choose the law and the Court at which their dispute arising out of their contract shall be determined. Ms. Lilian Shija was of the opinion that agreements by parties to choose their forum do not offend the public policy or the law. she relied on Ibrahim Said Msabaha versus Lutter Symphorian Nelson and Attorney General, Civil Appeal No.4/1997 decided by the Court of Appeal of Tanzania, wherein the court held that: "It is well established principle, that in civil cases, parties are at liberty to compromise their rights by 4 agreement, and the courts are bound to respect such compromise, unless it amounts to abuse of court process oris violative of the law or public policy." Ms. Lilian Shija prayed for dismissal of the suit with costs. In reply submissions, Ms. Loveness Ngowi, learned Advocate, submitted that the preliminary objection at hand does not qualify to be a preliminary objection as it is a matter of fact. She submitted that Clause 8 in the Transportation Agreement annexed as M-l and D-l in the plaint and WSD respectively, is the basis of the Preliminary Objection, but that the Plaintiff did not plead anywhere that the plaintiff has complied with Clause 8 of the agreement. She argued that this is a fact-finding mission. She argued that on the authority of Mukisa Biscuits Manufacturing Company Limited versus West End Distributors Limited at pg. 701 a Preliminary Objection was defined as raising a pure point of law argued on the assumption that all the facts pleaded by the other side are correct. Ms. Loveness Ngowi, submitted further that Clause 8 of the contract does not imply or suggest that mediation process shall be mandatory or it shall bind the parties to choose only the agreed forum to the exclusion of the court. She argued that negotiation is a separate forum, and once agreed, no party should be allowed to opt from it but that, in the pleadings before 5 the court, it has never been pleaded that the matter was referred to negotiation or any other means of solving dispute out of court. She argued that Clause 8 is not binding. It was only intended to maintain the contractual relationship between the parties. She argued that clause 11 of the same agreement allows applicability of the laws of Tanzania. Therefore, she argued, the ordinary courts have jurisdiction. She referred to the case of Sunshine Furniture to support her argument that despite the existence of a choice of forum in the clause 8 of the transportation contract, that does not oust jurisdiction of the Court. Ms. Loveness Ngowi, learned Advocate, argued from another angle that since Clause 8 of the Transportation Contract is part and parcel of the terms of the contract in dispute, in case the Defendant thinks that the terms under Clause 8 have been violated, he was at liberty to sue for breach of contract by virtue of the alleged breach by the Plaintiff of what was agreed under Clause 8 of the Contract, rather than raising a preliminary objection with a bid to enforce conformity to the contractual clause. Ms. Loveness Ngowi concluded that jurisdiction of a Court is a creature of statue and cannot be taken away by agreement of the parties. She submitted that as the Defendant relied on section 2 and 10 of the Law of Contract Act on elements of a valid contract, that is a matter that needs 6 evidence and proof of breach. She distinguished all the cases cited by the defendant as not applicable because in those cases parties had opted for court-based forum while in the case at hand there is no such agreement. She prayed for dismissal of the Preliminary Objection with costs. In rejoinder Ms. Lilian Shija mainly reiterated and reinforced her submissions in chief and submitted that the parties choice of forum to resolve their disputes in terms of Clause 8 of the transportation Agreement, does not include court proceedings. She responded further that although the cases cited in the submissions in chief indeed had a court-based forum choice while the present one doesn't have one, but the cases are relevant because they were based on agreement on choice of forum for dispute resolution just like it is the case in the present case. After hearing the learned counsel in their submissions, I am now in a position to determine the application at hand. The first issue is whether the court should give recognition to parties' own choice of method dispute resolution in their contract? It is not disputed that once the parties have, in their contract, agreed on their own mechanism of dispute resolution, the Court should respect the autonomy of the parties and endeavor to assist the parties in dispute to abide with their agreement 7 as to the manner and choice of forum for resolving their dispute. The parties' own-chosen forum should be given prominence under the doctrine of party autonomy. Party autonomy has been a common principle in contract law; thus, it has been drafted into most of the international conventions in contract law as well as into domestic laws governing contracts. Party - autonomy entails, amongst others, the parties'freedom of contract to decide the contractual terms and to negotiate the terms of their contract for which they give their consents. According to Justice Peter Tochtermann, in his work: Agreements to Negotiate in the Transnational Context - Issues of Contract Law and Effective Dispute Resolution, Dispute Resolution Institute at Hamline University, St. Paul, MN (USA): " Parties regularly include dispute resolution clauses into their contracts to make provision for future conflicts. Before being allowed to bring a claim in the respective state court or file a request for arbitration, the dispute resolution clause may require the parties to resort to structured negotiations or mediation. Only after such an attempt amicably to resolve the dispute has been made may they proceed to a Pinal and binding decision by a court or an arbitral tribunal." 8 In the case at hand, it is not disputed that the parties have a dispute resolution clause in their contract. The Plaintiff's counsel Ms. Loveness Ngowi has argued that the Plaintiff has not pleaded anything in reliance thereof. I do not accept that argument. The Plaint is very clear that the suit at hand is founded on a breach of contract and the contract has been attached by both parties. The dispute resolution Clause No.8 is contained in the contract which has been annexed to the pleadings as Annexture M-l to the Plaint and Annexture and D-l to the Written Statement of Defence, respectively. Clause 8 of the contract and provides: "The parties agree to negotiate and/or to settie amicably and in good faith any and all claims, controversies, differences and /or disputes, at any time, arising out of or in connection with this agreement including any question regarding its existence, interpretation, validity, termination or any breach thereof." It is clear that the above clause indicates a clear choice of out of Court mechanism of solving disputes under the said agreement between the parties herein. It is a choice of forum to be constituted by parties and process of dispute resolution, which were made by the parties exercising their power while signing the contract, under the doctrine of party autonomy. 9 in her submissions, Ms. Loveness Ngowi, learned Advocate, submitted that the cases relied upon by the Defendant's learned counsel are all based on choice of a court-based forum and hence distinct from the case at hand where the parties have opted for negotiation and in essence ADR processes. I asked myself whether the rule requiring forum choice includes also the ADR processes agreed by the parties like negotiation? My answer is in the affirmative. What matters is not the nature of forum or the process for dispute resolution. What matters is the enforcement of the contractual obligation entered by the parties as regards their own chosen manner of dispute resolution. Parties may agree on the forum, the dispute resolution process, the applicable laws as well as the persons to resolve their disputes. Even in arbitration parties may not have agreed on the name of the Arbitrator in advance. Once parties have an effective agreement on dispute resolution, the court should see to it that the parties are kept to their bargain. Bringing a dispute in court, instead of taking it to the forum or mechanism agreed upon, amounts to blatant breach of the parties' agreement. It is in public interest, and actually, one of the objectives of the law of contract, to ensure that individuals perform their enforceable agreements. The Court should give equal recognition to the parties' choice of other forms of alternative dispute resolution to the same extent it recognises the 10 parties' agreement to refer their dispute to arbitration. Actually, the Civil Procedure Code Cap 33 of the Laws of Tanzania puts much emphasis on alternative dispute resolution by insisting on parties to take bonafide steps to resolve their disputes amicably before going to Court. Section 10A of the CPC obliges parties to take bonafide steps to resolve disputes. It provides expressly that: "1OA.-(1) For the purposes of this Act, a person shall be deemed to have taken bonafide steps to resolve a dispute if the steps taken by the person in relation to the dispute constitute a sincere andgenuine attempt to resolve the dispute out of court, having regard to the person's circumstances and the nature and circumstances of the dispute. (2) For purposes of this Act, the following steps may be taken by a person as part of bonafide steps to resolve a dispute with another person- (a) notifying the other person of the issues that are, or may be, in dispute, and offering to discuss them with a view to resolving the dispute; (b) responding appropriately to any notification referred to under paragraph (a); (c) providing relevant information and documents to the other person to enable the other person to 11 understand the issues involved and how the dispute may be resolved; (d) considering whether the dispute could be resolved by a process other than a court action, including reconciliation, negotiation, mediation, arbitration, warning, diversion, as applicable; (e) if a process referred under paragraph (d) is agreed to- Ci) agreeing on a particular person to facilitate the process, where feasible; and (ii)attending the process; (f) if a process agreed under paragraph (e) is conducted but does not result in resolution of the dispute, considering a different process; or (g) attempting to reconcile or negotiate with the other person or otherwise engage in independent evaluation, with a view to resolving some or all the issues in dispute, or authorizing a representative to do so, before escalating the matter to mediation or arbitration. (3) For avoidance of doubt, the provisions of subsection (1) shall not limit the steps that may constitute taking bonafide steps to resolve a dispute. 12 (4) The provisions of this section shall apply to all proceedings intended to be initiatedin court." In the case at hand, the parties under Clause 8 of their contract have agreed to negotiate and/or to settle amicably and in good faith any and all claims, controversies, differences and /or disputes, at any time, arising out of or in connection with this agreement including any question regarding its existence, interpretation, validity, termination or any breach thereof. They are obliged to perform their contractual agreement by taking their dispute through the agreed process of dispute resolution prior to resorting to Court litigation. Actually, the law under section 10A of the Civil Procedure Code, enjoins them to do so. Therefore, I hold that as their contract had a dispute resolution clause employing dispute settlement mechanism of their own choice, they should exhaust the agreed mechanism before knocking the doors of the court. It was argued by Ms. Loveness Ngowi, learned Advocate for the Plaintiff, that if the Defendant is aggrieved by the plaintiff's non-conformity with clause 8 of their agreement, he should file a suit suing the Plaintiff for that breach. I think Ms. Ngowi, has not grasped the essence of a dispute resolution clause in an agreement. I will use the analogy of an arbitration clause to explain the nature of dispute resolution clause in a contract. The 13 best way to explain it judicially is by quoting the decision of the House of Lords(Supreme Court of UK) in Heyman r, Darwins Ltd. (1942) AC356 at page 375 which was quoted with approval by the Court of Appeal of Tanzania in Civil Appeal No. 115 Of 2005, between Tanzania Motor Services Ltd & Presidential Parastatal Sector Reform Commission versus Mehar Singh T / A Thaker Singh. It was held in Heyman v. Darwins Ltd (1942) AC 356 at page 375 that: "I venture to think that not enough attention has been directed to the true nature and function of an arbitration clause in a contract. It is quite distinct from other clauses. The other clauses set out the obligations which the parties undertake towards each other but the arbitration clause does not impose on one of the parties an obligation in favour of the other. It embodies the agreement of both parties that if any dispute arises with regard to the obligation which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution. And there is this very material difference, that whereas in an ordinary contract the obligation of the parties to each other cannot in genera! be specifically enforced and breach of them results only in damages, the arbitration clause can be specifically enforced by the machinery of the Arbitration Acts. The appropriate remedy for 14 breach of the agreement to arbitrate is not damages, but is enforcement." I am of the settled view that the same reasoning in Heyman v. Darwins Ltd (supra) can be extended to the other forms of alternative dispute resolution whose basis is contractual. There is an obligation under the agreement to refer the dispute to the designated ADR process, a duty which is sanctioned not only by the Law of Contrract Act, but also by Section 10A of the Civil Procedure Code.The remedy against the con-complying party is not a suit claiming damages for breach of the agreement to refer the dispute to the agreed mode of dispute resolution, as Ms. Ngowi, learned Advocate, would pre-suppose. The remedy is enforcement of what was agreed upon by the parties, that is to refer their dispute to ADR process of their own agreement. In this case, the Plaintiff was bound to firstly and bonafidely refer their with the Defendant to ADR as agreed under Clause 8 of their own contract. Through the Preliminary objection, the Defendant is resisting the suit and is demanding specific performance of their agreement as per clause 8. Ms. Lilian Shija, learned Advocate prayed for dismissal of the suit at hand because the court lacks jurisdiction, the issue is whether forum choice or choice of other mode of dispute resolution out of court ousts the court's 15 jurisdiction? My answer is in the negative. Parties by their agreement cannot confer or oust jurisdiction of the court. In the case of Sunshine Furniture Co. Ltd Versus Maersk China Shipping Line Co.Ltd and Another, Civil Appeal No.98 of 2016 decided by the Court of Appeal of Tanzania at Dar es Salaam, confirming the decision of this Court, held that: "In the present case, it was upon the parties choice of forum that the learned High Court Judge applied the provisions ofSection 7(1) of the CPC to find that the High Court was barred from entertaining the suit. His finding was based on the parties choice of forum. The parties did not by agreement, oust the jurisdiction of Tanzanian courts, rather they chose one of the courts which have jurisdiction, to be the court at which their dispute should be determine. In the circumstances, we agree with Mr. Nangi that the case of TANESCO versus IPPTL (supra) cited by the appellant's counsel is distinguishable." It follows therefore that despite the parties opting for alternative dispute resolution before bringing their dispute in court, still that does not oust the jurisdiction of this court. The Court has to stay the suit and refer the parties to their agreed dispute resolution process or forum. 16 In the end, I do uphold the preliminary objection raised in this case. I order that: a) The Plaintiff and the Defendant in this case are ordered to refer their dispute to the modes of alternative dispute resolution agreed between them in terms of Clause 8 of their Contract. b) Parties are ordered to exhaust the modes of alternative dispute resolution agreed between them in terms of Clause 8 of their Contract, in three months from the date of this Ruling and to evidence in Court documentary proof of conformity with this order as well as the outcome thereof. c) Pending the processes ordered in (a) and (b) above, the present suit shall be stayed. d) The Preliminary Objection is upheld with costs which shall be in the suit. It is so ordered. 17 Ruling is delivered in Court this 7th day of June 2024 in the presence of Ms. Lilian Shija, learned Advocate for the Defendant and in absence of the Plaintiff who was duly notified. 18