hass petroleum t ltd vs ukod international co ltd 2023 tzhccomd 47 28 february 2023

IN THE HIGH COURT OF UNITED REPUBLIC OF TANZANIA (COMMERCIAL DIVISION) AT DAR ES SALAAM COMMERCIAL CASE NO. 68 OF 2022 HASS PETROLEUM (T) LIMITED…….……….....PLAINTIFF VERSUS UKOD INTERNATIONAL COMPANY LIMITED……..……...……………...DEFENDANT RULING Last order: 13thday of December 2022 Ruling: 28th day of February2023 NANGELA, J. This ruling is in respect of a Notice of Preliminary Objection filed by the Defendant opposing the hearing and determination of this suit on the ground that the Court: 1. Lacks jurisdiction to entertain the suit; and/or 2. The suit is premature for deliberately by-passing the parties’ agreed dispute resolution mechanism. Before I go to the nitty-gritty of the objections raised by the Defendant, let me state the facts of this suit, albeit in short. The Plaintiff carries out the business of petro-fuel supplyand marketing. It is alleged that on diverse dates between 2 nd day of April 2015 and 23rd August 2020, the Plaintiff supplied on credit Page 1 of 16 and delivered on demand to the Defendant, petroleum goods of respective varying values. Initially, the supply arrangement was based on purchase orders, delivery notes or invoices and, in all such occasions of supply, the Defendant would acknowledge receipt upon delivery/collection of the respective petroleum consignment. On the 11th day of December 2018, the parties concluded a formal agreement (Petroleum and Petroleum Products Supply Agreement).It is averred that, although the parties signed that agreement, their relationship continued to be anchored on the initial modus operandi, whereby the supply was made on credit. The Plaintiff alleges, therefore, that, the suit is based not just on the partis agreement but on the totality of the transactions in the subject matter. It is further contended that, as of the 30thday of April 2020, a total of TZS 689,044,603.84 remained outstanding and payable as a result of goods collected from the Plaintiff’s depot located at Vijibweni, Kigamboni Area in Dar-es-Salaam and supplied to the Defendant. The Plaintiff has averred that, despite several demands, the Defendant refused, neglected or failed to settle the outstanding balance, and has, thence, remained in breach of the contract. It is on that account, that, the Plaintiff decided to file this suit, prayingfor judgement and decree as follows: Page 2 of 16 1. Payment of TZS 689,044,603.84 (the outstanding balance). 2. Payment of interest on the outstanding balance at the commercial rate of 25% from the 1 st of May 2021 to the date of judgement or sooner payment date; 3. Payment of further interest at the Court’ rate of 12% from the date of judgement to the date of judgement. 4. Payment of costs of this suit; and 5. Any other relief the Court deems fit to grant. On the 1st of August 2022, the Defendant filed her written statement of defense disputing the Plaintiff’s claims and, as I stated earlier hereabove, she further armed herself with preliminary points of law which, as a matter of practice, needed to be disposed of before this Court proceeds any further. On the 03rd day of October 2022, this Court ordered the parties to dispose of the said points of law by way of written submissions. On the material date, the Plaintiff enjoyed the legal services of Mr. Andronicus Byamungu, learned advocate while Mr. Jimmy Mrosso, a learned advocate, appeared for the Defendant. These learned counsels for the parties duly complied with the Orders of this Court and filed their respective submissions. This ruling, therefore,is meant to address their submissions and dispose of the two preliminary objections. Page 3 of 16 Submitting in support of the first objections, it was Mr. Mrosso’s submission that, the claims by the Plaintiff are premised on breach of contract by the Defendant. However, as per Clause 8 of the parties’agreement for the supply of petroleum products, there is an agreement regarding how the parties are to resolve their disputes. He submitted that, their chosen modes are negotiation, mediation and, finally arbitration. In view of that, he contended that, on the strength of Clause 8 of their main Agreement annexed to the Plaint as Annex HPTL-1, this Court’s jurisdiction is expressly ousted. He contended further that, there is nowhere is it stated that the Plaintiff has been faced with any difficulty in implementing the chosen path by the parties to resolve their dispute. To support his submission, Mr. Mrosso has referred to this Court the cases of Honda Motors Japan & Another vs. Quality Motors Ltd, Misc. Commercial Case No.25 of 2019 (unreported) and the case of Wembere Hunting Safaris Ltd vs. Registered Trustees of Mbomipa Authorized Association, Commercial Case No.40 of 2013 (unreported) regarding the need to resort to arbitration, where the parties have so expressly agreed. As regards the second objection, it was Mr.Mrosso’s submission that, the suit is prematurely brought before this Court for by-passing the pre-determined dispute resolution mechanism. In his submission, Mr. Mrosso contended that, the same Page 4 of 16 arguments used in disposing of the first limb of the objection similarly applies to the second object as the two are inseparable. He,therefore, urged this Court to struck out this suit with costs because the Court lacks jurisdiction to entertain it. Responding to the objections raised by the Defendant, the learned counsel for the Plaintiff submitted that, the issue relating to arbitration must be dealt with in accordance with the dictates of the Arbitration Act, Cap.15 R.E 2020. He contended that, once the Court notes that there is an arbitration clause to be adhered to, the law has provided for a mechanism regarding what should be done. Mr. Byamungu contended, and correctly so, in my view, that, under the Arbitration Act, any suit filed in contravention of an arbitration clause is not void or defective but it is a competent suit and the Court should employ certain considerations and order appropriate remedies which are provided for under the law, which are either to enforce the arbitration clause, if a test of a valid arbitration agreement is met, or proceed with the suit. He contended further, that, at best, the preliminary objections should not have been raised by way of a separate Notice of Preliminary Objection as done by the Defendant, but by way of a Petition as per section 13(1) of the Arbitration Act. In his views, petitioning the Court to enforce an arbitration agreement is optional; meaning that, the party against whom the Page 5 of 16 proceedings are brought may opt not to petition and continue defending the suit. Mr. Byamungu surmised, therefore, that, the suit at hand is not incompetent because of mere presence of an arbitration clause and the Court is not precluded from trying it in the absence of a petition to enforce that arbitration agreement. Mr. Byamungu contended further, that, the decision of this Court in the case of Queensway Tanzania (EPZ) Ltd vs. Tanzania Tooku Garments Co. Ltd, Misc. Commercial Cause No.43 of 2020 (unreported) which upheld a preliminary objection based on the Mukisa Biscuits vs. West End Distributors Manufactiring Co. Ltd [1969] EA 696, was made per incuriam. In his further submission, Mr. Byamungu contended that, as per section 13(4) of the Arbitration Act, the Court must be satisfied, apart from there being such an arbitration agreement, that, the clause is not null and void or inoperative or incapable of being performed. He held a view that, if any of such deficiencies exists, the Court must proceed with the hearing of the case. Referring this Court to the book by Alan Redfern & Martin Hunter et al, Law and Practice of International Commercial Arbitration, Sweet & Maxwell (2004), London, at pages 196- 199, he contended that, defective or pathological arbitration clauses such as those which make reference to non-existent arbitral institutions or rules or those referring to non-existent Page 6 of 16 arbitrators, unworkable arbitration clauses, or which a vague makes the arbitration clause incapable of enforcement. He contended that, looking at the Clause 8 of the parties’ agreement which the Defendant’s legal counsel has relied on, that clause is defective and incapable of being enforced. He argued, however, that, the Court may sever the defective parts and enforce the valid part of the agreement but he was of the view that, this Court should not do so in this matter where the chosen tribunal, law and venue are all non-existent. He was of a further view that, even what is being claimed by the Plaintiff is beyond monetary damages as the Plaintiff is claiming for fulfillment of payment obligation by the Defendant which is equivalent to specific performance expressly excluded from arbitration according to the arbitration clause. He contended further that, no party has even petitioned the Court to make an order that the matter be referred to arbitration as required by the Arbitration Act and, that, the raised preliminary objection is not the legal mechanism upon which the Court can shut out a litigant and order the parties to refer their dispute to arbitration. As regards the remedy of striking out the suit, he relied on the case of Scova Engineering Sp.A & Another vs. Mtibwa Sugar Estate Ltd and 3Others, Civil Appeal No.133 of 2017 (unreported) and contended that, the Court cannot struck out or dismiss a suit based on objection on choice of forum. For him, Page 7 of 16 existence of a choice of forum or arbitration clause does not oust the Court’s jurisdiction. To support his contention and urging this Court to dismiss the objections with costs and proceed with the main case, Mr. Byamungu relied on the decision of the Court of Appeal in Scova’s case (supra) as well as the decision of the same Court in the case of Sunshine Furniture Co.Ltd vs. Maersk (China) Shipping Co.Ltd & Another, Civil Appeal No.98 of 2016 (CAT) (unreported). In a brief rejoinder, the Defendant’s counsel rejoined that, under section 12(1) of the Arbitration Act, Cap.15 R.E 2020, the law empowers the Court to refer parties to arbitration where it is found that there is an arbitration agreement provided the Plaintiff applies not later than the date of submitting his first statement of claim on the substance of the dispute. He contended that, the Court can only refuse if there is no valid arbitration agreement, arguing that, that is not the case as regards the present suit at hand. He further rejoined that, even under section 12(3) of the Arbitration Act, Cap.15 R.E 2020, notwithstanding any application under section 12(1) of the Act, still arbitration may be commenced. He contended that, the parties consciously chose their preferred mode of dispute resolution starting first with negotiations and mediation stages and that cannot be bypassed. He argued that, if arbitration was incapable of being pursued, Page 8 of 16 what about the rest (negotiation and mediation?) Save for the case of Queensway(supra), Mr. Mrosso distinguished all other cases relied upon by the Plaintiff’s counsel and submitted that, this Court is barred from entertaining the present suit. I have carefully considered the rival submissions made by the two opposing counsels. The issue which I am confronted with is whether the objections raised by the Defendant are meritorious. However, before I tackle that paramount issue, I find it apposite to make some comments in respect of the submissions made by Mr. Byamungu and those made by Mr.Mrosso. In the first place, I wish to point out that, both counsels have cited as reference supporting their submissions, provisions of the Arbitration Act which do not support the version of their submissions. For his part, for instance, Mr. Byamungu has relied on section 13 of the Arbitration Act, Cap.15 R.E 2020 but that section has nothing to do with what he stated. The section deals with the effect of death on an arbitration agreement. Equally, although Mr. Mrossorelied on section12 of the Act, my reading of the section and his submission tells a different thing altogether as the section deals with separability of an arbitration agreement when it forms part of another agreement. Secondly, I wish also to comment onMr. Byamungu’s submission which was to the effect that the case of Queensway Tanzania (EPZ) Ltd vs. Tanzania Tooku Garments Co. Ltd, Page 9 of 16 Misc. Commercial Cause No.43 of 2020 (unreported) was held per incuriam. In my view, his submission is erroneous and lacks the authoritative flavor. I hold it to be so because, he does not have the mandate to denounce a decision of this Court since, that is the mandate of either this Court on its own or of the Court of Appeal in an appeal. Since the decision of this Court has never been overturned by the Court of Appeal, Mr. Byamungu has no mandate to denounce it as a decision made through lack of due regard to the law or the facts. Thirdly, the Queensway’s decision cannot be said to be per incuriam merely because it was based on the principle enunciated in the Mukisa Biscuits’ case (supra). As it is well known in our jurisprudence, the Mukisa Biscuits’ case has been relied upon authoritatively several timesas a reliable authority on matters regarding preliminary objections, not only by this Court, but also by the Court of Appeal. In essence, therefore, a preliminary objection being a point of law which has the effect of disposing of a matter, and especially one touching on the jurisdiction of the Court, can be raised at any time, even at an appellate stage. See the decision of the Court of Appeal in the case of Mvita Construction Company vs. Tanzania Harbours Authority, Civil Appeal No.94 of 2001 (unreported). I Page 10 of 16 As such, a preliminary objection being a point of law, may either be raised by a party or even by the Court itself suo motu. Whether the same is raised by way of notice of objection or by any other means prescribed, that makes no difference since the effect, if the objection is meritorious, will be the same, i.e., the matters before the Court will either be struck out or dismissed depending on the circumstance for each case. Let me now turn to the merits of the objections raised in this Case. Mr. Mrosso has objected the suit from being entertained on the ground that, this Court lacks the jurisdiction to do so,given that, the parties have, on their own accord, chosen a different mode of resolving any of their disputes. In his submission, however, Mr. Byamungu has contended otherwise citing the decision of the Court of Appeal in Scova Engineering Sp.A & Another (supra). In my view, I tend to agree with what Mr.Byamungu stated, i.e., this Court’s jurisdiction cannot be ousted by the parties. They do not confer it on the Court and cannot as well take it away by agreement. In my view, the best way to make the point which Mr. Mrosso seeks to make, when there is a jurisdictional question touching on this Court, is that the Court’s jurisdiction can be exercised over the matter laid before it. Exercise of a Court’s jurisdiction is a different issue altogether as it may be impaired by some factors, including where parties had, in exercise of their Page 11 of 16 autonomy contracted not to submit their dispute to the Court but to an arbitrator, mediator or any other forum of their choice. In this instant case, the parties’ controversy is anchored on Clause 8 of an agreement which governs their contractual relationship. That particular Clause reads as follows: SECTION 8: DISPUTE RESOLUTION Should any dispute, claim or controversy arise between the parties (hereafter referred to as the “dispute”), concerning this Agreement, the Parties shall attempt to resolve the dispute by negotiation. This entails that one party invites the other party in writing to meet to resolve the dispute within seven (7) days from the written invitation. If the dispute has not been resolved by such negotiation within thirty (30) days or such longer or shorter period as the Parties may agree, the dispute shall then be resolved by a single arbitrator to be appointed by agreement between the Parties or in default of such agreement within 14 days of notification of a dispute, upon application of either Party, by the Chairman of the time being of the Tanzania Branch of Chartered Institute of Arbitrator of the United Kingdom. The Arbitration shall be held in Dar-es-Salaam, the United Republic of Tanzania in accordance with the Rules of Arbitration Act 1995or any law amending or replacing it and shall be conducted in English. All arbitral awards in relation to this Agreement shall be limited to pecuniary damages and shall not demand specific performance or lead to Page 12 of 16 the modification of the terms and/or conditions of this Agreement. To the extent permissible by law the arbitral award shall be final.” In his submission, Mr. Byamungu has faulted this Clause contending that,it is vague and hence unenforceable for it makes reference to a non-existing choice of law as well as arbitrator and, that, the parties had agreed that the referred dispute should not be on matters regarding specific performance. Although Mr. Byamungu referred this Court to the book by Alan Redfern & Martin Hunter et al, Law and Practice of International Commercial Arbitration, Sweet & Maxwell (2004), London, at pages 196-199, to support his submission, unfortunately the relevant pages from such a book were not attached to his submission for this Court’s reading. Notwithstanding that fact, I think there is a point to note and look at in his submissions. According to section 15 of the Arbitration Act, Cap.15 R.E 2020, this Court has a discretion to stay a suit or proceedings pending arbitration. However, if the Court is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed, the Court will not stay the suit. I wish also to state, albeit in orbiter, that, the Court may even refuse a stay and strike out the suit with leave to refile, especially when it is clear to the Court that the suit will unnecessarily create a backlog of cases. Page 13 of 16 In this present suit, however, the Defendant is not asking for a stay of this suit but rather that, it be struck out and the prayer to do so has come at the wake of a preliminary objection touching on the jurisdiction of this Court. The question to ask, therefore, is whether, the arbitration agreement (i.e., Clause 8 of the Parties Main Agreement) is defective and inoperative or incapable of being performed. Mr. Byamungu has contended that it is while Mr. Mrosso does not see it that way. In my own observations, save for the phrases: “…by the Chairman of the time being of the Tanzania Branch of Chartered Institute of Arbitrator of the United Kingdom. The Arbitration shall be held in Dar-es-Salaam, the United Republic of Tanzania in accordance with the Rules of Arbitration Act 1995or any law amending or replacing it…” the Clause 8 of the Agreement is indeed about referring the parties dispute related to the agreement to alternative dispute resolution mechanism other than the Court, commencing with parties’ negotiation and where it fails, arbitration. As such, even if one is to sever those words from the agreement, an act which Mr. Byamungu concedes that the Court can do, still, the agreement to resort to negotiation and arbitration will still stand. If the agreement to resort to arbitration will still Page 14 of 16 stand and the parties will be found to have not chosen the law, their chosen arbitrator will have to make a ruling on such a point and that will not be a matter for this Court to decide on. However, in his submission, Mr. Byamunguhas contended that, the parties have placed a limitation on the kind of dispute will have jurisdiction to entertain. I have looked at the Clause and, indeed, Clause 8 of the Parties’ main agreement to resort to arbitration, limits the type of dispute for which an arbitral award is to be issued in case a reference to arbitration is made. According to the said Clause 8, such disputes are “limited to pecuniary damages andshall not demand specific performance”. In his submission, Mr. Byamungu has contended that, the gist of the matters inthe present suit is about specific performance given that, the Plaintiff is claiming fulfillment of payment obligations by the Defendant. Looking at the Plaintiff’s claims and what the parties have expressly said in Clause 8 of their Agreement, I tend to agree with Mr. Byamungu that, the dispute at hand, even if referred to an arbitrator will not be the dispute which the parties agreed should be referred to an arbitrator. This is a kind of dispute which the parties have, in exercise of their autonomy, decided that, should not be subjected to arbitration. It follows, therefore, that, the dispute at hand having been removed from the ambit of what may be referred to arbitration, Page 15 of 16 should only be resolved by the Court and not otherwise. That means, the objections must fail. In the upshot of the above foregone discussion, this Court settles for the following orders: 1. That, the two preliminary objections raised by the Defendant are devoid of merits and are hereby dismissed because, the parties’ agreement to resort to arbitration does not include matters forming the gist of this present suit. 2. That, the dismissal of the two preliminary objections is with costs to the Plaintiff. 3. The parties are hereby directed to proceed with the hearing of the main suit on the date and time to be notified by the Court. It is so ordered. DATED AT DAR-ES-SALAAM ON THIS 28thDAY OF FEBRUARY 2023 ................................... DEO JOHN NANGELA JUDGE Page 16 of 16