ms e a construction vs permanent secretary ministry of planning economy empowerment another 2008 tzhccomd 11 15 august 2008

IN THE HIGH COURT OF TANZANIA [COMMERCIAL DIVISION]

AT DAR ES SALAAM MISC COMMERCIAL CAUSE NO 13 OF 2007 IN THE MATTER OF ARBITRATION ACT, CAP 15

AND

IN THE MATTER OF ARBITRATION

BETWEEN MS E & A CONSTRUCTION PETITIONER/CLAIMANT AND PERMANENT SECRETARY, MINISTRY OF PLANNING, ECONOMY & EMPOWERMENT............... 1st RESPONDENT ATTORNEY GENERAL........................... 2nd RESPONDENT

RULING WEREMA, J This is a matter arising out of Arbitration conducted under the Arbitration Act, [CAP 15 R.E 2002]. The parties to arbitration proceedings conducted under the auspices of the National Construction Council were Messrs E &A Construction Company Ltd on one hand; and the Permanent Secretary, Ministry of Planning, Economy and Empowerment. The former is a private construction company registered by the Contractor's Registration Board in Class 5(building category); and the latter is a government ministry. The relationship of the parties was contractual. The respondent had invited for bids for tender number 4 of 2004/05 for rehabilitation of Mipango Building along Kivukoni Front. This was 1 phase II. The bid contained Conditions of Contract. There were no Special Conditions of Contract to supplement those conditions as is the case with other conditions. This Agreement was signed on 25th October 2004 according to Form of Agreement. The contract sum was shs 177,907,116/=. A Certificate of Practical Completion was issued on 12th October, 2005. A final account in the sum of Shs 140,810,259.60 was paid to the contractor, the claimant herein, while a sum of shs 15,171,147.18 was withheld as liquidated damages from certificate number 7. The agreement indicated a mode of dispute settlement in Article 24. It also contained a procedure for the conduct of the proceeding including

how the adjudicator shall be paid. It was a condition stipulated there that costs of adjudication shall be divided equally between the employer and the contractor. The Procedure under which the proceedings were to be conducted was stated to be an institution named in the Contract data and Article 25 referred the National Construction Council as such institution. Tanzania Institute of Arbitrators was given authority to appoint an adjudicator. This mode of dispute settlement appears not to have been followed as it was said to be not ideal for the kind and stage of the dispute. Be as it may, the parties agreed on a sole arbitrator. The proceedings under him were governed by the Rules the National Construction Council, 1991 edition. The record show that Mr 2 Lukwaro appeared as an Advocate for the Permanent Secretary, Ministry of Planning, Economy and Empowerment. He acted as such throughout. The Attorney General or any Law Officer from his Chambers did not participate in these proceedings and there is nothing on record to show that he was aware or informed about the process. The Permanent Secretary and the tender in question are subject to the conduct of business of public service of the United Republic. Public service operations are regulated and rule based. Under Article 59(3) of the Constitution of United Republic of Tanzania, the Attorney General is the chief legal advisor to

the Government and is accountable on all legal affairs of the Government personally or through law officers in his chambers. Communications between him and other departments are regulated by the Standing Orders which were made under Section 24(5) of the Civil Service Act, 1989. Regulation B.9 of the Standing Orders provides that: (a) Legal advice should always be sought in writing except where the circumstances of the case dictate otherwise. The officer making the request should ensure that the full facts are giveri'td the Attorney General, should draw attention to any previous legal opinions which might have a bearing on the case, and should set out in a 3 separate paragraph the specific question or questions of law on which advice is desired; (b) (c) ... (d) The Law officers should always be consulted (i) before any payment of compensation is made or refused, or in matters in which proceedings might have to be taken in court; (ii) (iii) There is nothing on record to show that the Permanent Secretary did at any time consult the Attorney General before a dispute was declared or in engaging Mr Lukwaro as an Advocate for the Ministry. Mr Lukwaro as a legal practitioner must have or ought to have known that he was stepping in a matter for which he had no standing under the law because his appointment was not approved by Attorney General. Public service is not a kingdom of

catfish where authority is never centralised. This is not in tandem with rule of law. The outcome of this bizarre situation is that the Permanent Secretary was not represented in the arbitration proceeding presided over by the sole arbitrator. Mr Lukwaro representation was illegal and a nullity. The accounting officer who appointed him did so in violation of the Constitution. In such a situation can it be 4 said that there was a valid arbitration under the laws governing arbitration? My reply will come shortly. When the matter came for enforcement of the award, the Attorney General was joined as the second respondent. That seems to be the first time he became aware of the illegality of representation at the arbitral proceedings. He appears to have abandoned the 1st Respondent. This was probably a protest to 1st Respondent's conduct but I think illegality cannot be sustained by a breach of law or looking the other way. I have read the submissions by the parties. I agree with Dr Mapunda, learned Counsel for the Claimant that the appropriate way was for the Respondent's to petition to set aside the award. However, the Attorney General became aware of this matter when there was a petition to enforce the award by the claimant. The Permanent Secretary had no legal counselling; having decided that Mr. Lukwaro learned Advocate had no standing in the matter. The two grounds, in my

considered view, are sufficient to let the Respondent challenge the award in the way they have done. I am grateful to Dr Mapunda, Learned Advocate for his research and industry. I need not distinguish decisions he has cited. They are useful. I agree that arbitrators are judges of facts. 5 There are several practical considerations that must be taken into consideration in order to secure credible system of settlement of disputes other than adjudication. Courts of law must defer but not abandon their supervisory role. It must be so here. My considerations are as follows: (a) Arbitration is based on consent of a party. Indeed, there was an agreement to arbitrate. But the 1st Respondent was not appropriately represented in law; He had no advocate representing him. The award is in conflict with public policy and article 13 of the Constitution; (b) If the 1st respondent was not represented, there was a breach of the constitution and the regulations of the Standing Orders and therefore a breach of the law of the place arbitration (the Lex arbitri) which by itself is a ground to nullify the proceedings; it is mandatory that the Attorney General be aware of matters of this kind and in this case, for no apparent reason of his, he was not. This violated the Laws of Tanzania which is a governing law of Arbitration; the first respondent was thus procedurally disadvantaged. This is a

minimum requirement standard in any credible arbitration proceedings; it also show that the respondent did not receive fair hearing of his case. This alone is a ground 6 to set aside the award. I am guided, though not bound by a decision in PARSONS & WHITTEMORE OVERSEAS CO. INC V SOCIETE GENERALE DE ^INDUSTRIE DU PAPIER(RAKTA) 508 F.2D 969 (2nd cir. 1974) 975 which decided that the standards are those of a country where arbitration is held. Fair hearing is a constitutional right in this jurisdiction and here, there was none. (c) It is a rule of practice and a standard norm that the arbitrator should not act in excess of authority or lack of due process. There is a built in mechanism for sharing of costs under Article 25.2 of the Agreement but the Arbitrators appears to have apportioned arbitration costs to the 1st Respondent. Allocating or apportioning of costs to one party violates an agreement to arbitrate because the arbitrator has dealt with a matter not covered by the agreement thereby rendering the arbitrator incompetent for lack of jurisdiction. I am in my mind that the word misconduct and impropriety as used in the Act should be broadly construed to accommodate evolving terminologies in arbitration that have evolved in the last two decades well after the Act was enacted; 7 The gist of these considerations is to indicate that the grounds for setting aside an award are

broader than those stated in D.B. SHAPRIYA & CO LTD V BISH INTERNATIONAL B.V cited by Dr Mapunda, Learned Advocate. The reasons are obvious. Our Arbitration Act though reviewed recently still has the Geneva Convention on Arbitral Award of 1923 appended as the Fourth Schedule which was replaced by the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958 (The New York Convention). I am aware that Tanzania acceded to the Convention. It has been invoked by Tanzania in its international commercial arbitration. The Convention has additional value in respect to grounds on which recognition and enforcement of award may be refused under Article V. I think the categories of misconduct, a term used in Section 16 of the Act are broader than impropriety. Some of these are related to errors of arbitrators on the surface of the record of award, assumption of jurisdiction in violation of the agreement; fraud, bias etc. I have taken note of the strong presentation that once an award under Section 17(1) of the Arbitration Act is filed the award becomes a decree. I think that is true. But it does not mean that the Court cannot act on its own motion, if it appears to it that it offends the minimum sense of justice on 8 the basis of errors apparent on the record. I am and do so decide, that this is a ground to set it aside even if there has been no petition to set

it aside. I also think that even when the award is contested after it had been registered, the court retains its jurisdiction to set it aside on the grounds I have stated above. I am convinced that to allow this award to be enforced as a decree will be a travesty of justice in view of what I have staffed above. I cannot remit it to the arbitrator because there is Nothing to be remitted. A nullity cannot be remitted. The dlaimant is at liberty to commence fresh proceedings. I cannot advise ex gratis but it is in order if First Respondent sholuld defer the matter to Attorney General for his evaluation anfci settlement. The Claimant shall be at liberty to proceed in tHe manner he deems appropriate. The award filed in Court on 30th August ^007 being a nullity, is hereby set aside. No order is made as Ito costs. It is so decided. F.M Werema,

JUDGE 15th August, 2008. I Certify that this is a true and Correct 1,858 words •J tfjv or, n 'ndge .eni Rmi.ng eiistrar Co.aniercia: Court 9