CIVIL APPEAL NO 396 OF 2022 MS HODI HOTEL MANAGEMENT COMPANY LIMITED VS MS JANDU PLUMBERS LIMITED

IN THE COURT OF APPEAL OF TANZANIA AT ARUSHA fCORAM: MKUYE. J.A.. RUMANYIKA, 3.A. And MDEMU. J.A.1 CIVIL APPEAL NO. 396 OF 2022 Reference No. 20220907000446282 M/S HODI (HOTEL MANAGEMENT) COMPANY LIM ITED........... APPELLANT VERSUS M/S JAN DU PLUMBERS LIMITED...............................................RESPONDENT (Appeal from the Judgment and Decree of the High Court of Tanzania at Arusha) (Gwae. 3.^ dated the 20th day of August, 2021 in Civil Case No. 3 of 2020 JUDGMENT OF THE COURT 19th & 28th February, 2025 MKUYE. J.A.: This is an appeal from the judgment and decree of the High Court of Tanzania at Arusha (Gwae, J) dated 20th August, 2021 which was delivered on 23rd August, 2021 in Miscellaneous Civil Cause No. 3 of 2020. In the said judgment, the High Court allowed the petition against the o award and dismissed the proceedings and its arbitral award and ordered for re-arbitration by another arbitrator to be duly selected and agreed by the parties. Before embarking into the determination of the appeal on merit, we find it appropriate to narrate, albeit, a brief background of the matter as can be gathered from the record of appeal. The appellant, M/S Hodi (Hotel Management) Company Limited and the respondent, M/S Jandu Plumbers Limited are limited liability companies incorporated under the Companies Act, Cap 212 R.E. 2002. On 18th December, 2007, the appellant entered into a contract with the respondent for the rehabilitation and upgrading of Mount Meru Hotel owned and managed by the appellant. The contract entered was for wet work (Wet Works Contract) based on the First Edition (1999) of the International Federation and Consulting Engineers (FIDIC). The value of the contract was USD 2,095,102.69 and the respondent performed some preliminary works at the site. However, according to the respondent neither drawings for the work nor funds were provided by the appellant up to 7th November, 2008 when she decided to terminate the contract. The respondent, then, instituted before the High Court Civil Case No. 3 of 2010 against the appellant for breach of contract which led the respondent to terminate theJ Wet Works Contract. Among the reliefs claimed were to be paid for the works done by her and for breach of contract. However, the trial of the suit could not commence as it was 2 stayed by the High Court (Massengi, J. as she then was) pending reference to arbitration, vide Miscellaneous Civil Cause No. 31 of 2013 which was lodged by the appellant pursuant to the arbitration clause in the parties' agreement dated 18th December, 2007. Following the High Court's order for stay, the respondent filed a petition for arbitration against the appellant in which she sought several reliefs before the arbitrator amounting to USD 6,054,750.85 being special and general damages arising from the appellant's breach of contract. The appellant, on the other hand, denied the petitioner's claims and raised her counter claim against the respondent praying for: payment of USD 290,906.00 being principal payments on its project financed during the three months delay; payment of USD 250,000.00 being costs incurred during the delay of the project by the respondent for not releasing the site promptly; and costs of the arbitration. Before the commencement of the hearing of arbitration, there were interlocutory applications that were made by the petitioner and rulings thereof issued particularly, on the jurisdiction of the arbitrator; compliance of requirement of conducting mediation before arbitration; and appearance of foreign practitioners before the sole arbitrator without first obtaining practicing licences from the Chief Justice. It is also gathered from the record of appeal that, before the arbitrator, 27 issues were framed. At the hearing, the respondent (petitioner) paraded a total of six witnesses while the appellant (respondent) summoned three witnesses. In the end, the arbitrator procured an award to the effect that: one, the respondent's claims were dismissed in their entirety with costs; two, the respondent was found to have been fully paid for the works done under the Wet Works Contact; and three, that the respondent was in breach of the contract between herself and appellant by failing to promptly leave or vacate the appellant's site thereby preventing the appellant from replacing her with a new contractor for the completion of the works on time. On the other hand, the appellant's counterclaims were awarded against the respondent with among the orders of: one, payment of USD 130,33.44 being fees that the appellant paid for restructuring the loans advanced to her; two, payment of USD 424,577.20 being interest that the respondent was compelled to pay on the loan; three, payment of interest; four, payment of USD 169,938.39 being the sum overpaid to the petitioner by the appellant; and five, payment of costs for the counter claim. Aggrieved with the award, the respondent filed a petition before the High Court vide Miscellaneous Civil Cause No. 3 of 2020 seeking to set aside the arbitration award on 18 errors apparent on the face of the award. After the conclusion of the hearing, the High Court allowed the petition without costs, in which case, the arbitration proceedings and its award were set aside; and the matter was ordered to be expeditiously re­ arbitrated by an arbitrator duly selected with and agreed on by the parties. It was also ordered that the arbitrator selected or appointed by the body should assume his role after proper mediation procedure has been observed as per the parties' contract under Clause 20:2. Aggrieved by the finding of the High Court's decision, the appellant has preferred this appeal basing on three grounds of appeal with an addition of one new ground, which for a reason to be apparent shortly, we will not reproduce. When the appeal was called on for hearing, Dr. Wilbert Kapinga, learned advocate appeared representing the appellant. On the other hand, the respondent had the services of Messrs. Julius Kalolo Bundala and Elvaison Maro, both learned advocates. Each side sought to adopt the s written submissions they had filed earlier on to form part of their oral submissions. Before submitting on the grounds of appeal, Dr. Kapinga sought to argue the appeal on four issues he had identified in the course of his preparation for hearing. Submissions were made by both parties on all issues. Nevertheless, we opted not to reproduce all the issues as we find that only two of them will suffice to dispose of the appeal without necessarily dealing with other issues. The said issues are: 1) W hether the m ediator provided an opinion so as to ciothe the arbitrator with jurisdiction to adjudicate the petition. 2) Whether it was proper for the High Court Judge to set aside the award and ordering the dispute between the parties to be re­ arbitrated by another arbitrator. With regard to the issue relating to the opinion of the mediator, Dr. Kapinga argued that, in essence, the issue of opinion is a creature of Clause 20. 2 of the Arbitration Agreement. He pointed out that, para 2 of the Clause requires the mediator to give opinion in writing. Dr. Kapinga contended that, at page 1184 of the record of appeal, there is a closure report made by the mediator which satisfied the arbitrator to proceed with the arbitration. He argued that, although Clause 20. 2 of the Arbitration Agreement requires an opinion to be in writing, it does not mean that it 6 must be detailed as it is to be used for admission. He was, therefore, of the view that, the learned High Court Judge misdirected himself when he said that the opinion of the mediator was not provided while there is a report to the effect that" Mediation has failed* as shown at page 1184 of the record of appeal. He contended that, by holding that there was no reasoned opinion the High Court Judge went too far in error. On being prompted by the Court on how he interpreted the phrase " written opinion" as contained in Clause 20. 2 of the Arbitration Agreement, more so, when taking into account that it is binding to the parties, Dr. Kapinga was of the view that, the mediator's report was proper under the law and that the mediator could not be questioned on the outcome. Dr. Kapinga went on to argue, in relation to the issue of the High Court setting out the award that, according to the old Arbitration Act, the award could be challenged on few areas. He elaborated that, the arbitration award could be challenged before the High Court basing on misconduct by the arbitrator or where the award is procured improperly. Dr. Kapinga, therefore, argued that, the High Court Judge misdirected himself in setting aside the arbitral award and ordering for the re-arbitration before another arbitration as it was in contravention of section 16 of the Arbitration Act. He stressed that, the High Court's power under the old Act, in as far as setting out the award is concerned, was limited to misconduct of a mediator or improper procuring of the award, in which case, the High Court could set aside or remit the matter for re­ consideration and determining the unattended issues before the same arbitrator. In other words, he said, there is no provision in the Arbitration Act, which empowers the High Court Judge to make such an order as he did. In response, Mr. Bundala argued that the mediator being an adjudicator was required to give a written opinion as per Clause 20. 2 of Arbitration Agreement which forms the basis of his decision. As to the meaning of opinion, he referred us to the Oxford Dictionary and Longman Dictionary of Contemporary English in which the term Hopir>ion"\s defined. It was Mr. Bundala' argument that, an opinion needs to be detailed as it forms the basis of the decision. Thus, under Clause 20.2 of the Arbitration Agreement, the opinion has to be given to the parties just as it helps the arbitrator to be clothed with jurisdiction to move forward with the dispute. He countered Dr. Kapinga's argument that, the said opinion was meant to be used in admission of the dispute contending that it gives jurisdiction which goes to the root of the matter. It's importance, he said, 8 can be seen when the arbitrator stayed proceedings before him and referred it first for mediation. On the issue whether the High Court Judge had power to set aside the arbitration award, it was Mr. Maro who responded to it. In the first place, he agreed with Dr. Kapinga that, in terms of section 16 of the old Arbitration Act, an arbitration award could only be set aside basing on a misconduct by the arbitrator or improper procurement of the award. In this case, Mr. Maro argued, the High Court Judge rightly set aside the award since parties were denied the right to be heard. We have keenly examined the submissions from both the counsel for the appellant and the respondent on these two issues and, we think, we are now in a position to deliberate on them. Starting with the issue of whether the mediator's opinion was a condition precedent to arbitration, we think, Clause 20.2 of the Arbitration Agreement will give us guidance. It provides as follows: Should the parties fa il to reach such settlem ent within a further period o f fourteen days, the m atter may within further period o f fourteen days be referred by either party without legal representation for opinion to a m ediator selected by and agreed on by the parties. The m ediator shall within a period o f twenty-eight days o f the written representation o f the parties give his opinion in writing and furnish the em ployer and the contractor each with copy thereof,... The said opinion shall be fin al and binding on the parties unless either party within fourteen days o f receipt thereofdisputes the same by written notice to other"[EmpY\as\s added] Our understanding of the above excerpt is that: One, if the settlement of the matter between the parties fails, the same may be referred by any of the parties for opinion to mediator of the parties7choice. Two, the mediator is mandatory required within twenty-eight days of parties'written representations, to give his opinion in writing. Three, the mediator is to furnish the employer and the contractor a copy of such opinion; Four, the opinion shall be final and binding on the parties unless, within fourteen days of its receipt, any party gives notice to the other to dispute it. Unfortunately, the term "opinion" is not defined in the old Arbitration Act, which was applicable by then. We did not lay a hand on the definition in either other written laws or precedents. However, we were able to glean definitions in Longman Dictionary of Contemporary English and Oxford Dictionary as were referred to us by Mr. Bundaia. In the former dictionary the term "opinion" is defined as follows: "Opinion"m eans ideas or beiiefs about a particular subject or judgm ent or advice from a professionai person about something " The definition in Oxford Dictionary is as follows: "Opinion" means a view or judgm ent form ed about something, not necessariiy based on fact or knowiedge or a statem ent o f advice by an expert on a professionai m atter" In our view, the definitions from the Dictionaries cited above connote that an opinion has to offer explanation on something. It is something which must contain ideas, views, thought or beliefs on a certain subject; or must provide a judgment, advice on a professional issue or attitude towards a certain matter. As it is, it does not envisage an opinion to be in a form of a mere conclusion or declaration. We have perused the purported mediator's opinion dated 29th August, 2017 found at page 1184 of the record of appeal. The relevant portion thereof reads: "CONSTRUCTION OF MOUNT MERU HOTEL DISPUTE MEDIATION BETWEEN JANDU PLUMBERS LIMITED AND HODI (HOTELS MANAGEMENT) COMPANY LIMITED. MEDIA TOR'S CONCLUSION Further to m y appointm ent as a m ediator for the above-m entioned dispute, I confirm that I carried out the mediation process and hereby declare that the mediation between the two parties has failed..." [Emphasis added] Looking at the above quotation, some few things emerge. One, the excerpt exhibits a mediator's conclusion as is vividly shown in the subtitle of the document. Two, it depicts confirmation of having carried out the mediation without showing what entailed the mediation he was reporting to. Three, the report does not depict elements of views, advice or judgment within the meaning of an opinion given by the Dictionaries. Four, it is a declaration that mediation has failed by the use of the word Vec/are "thereon. As it is, it does not have the elements of opinion as defined in the Oxford and Longman Dictionaries as well argued by Mr. Bundala that it must contain a reasoned professional advice from the relevant industry. In other words, the opinion is supposed to contain someone's views, attitude, judgment or advice and, most probably, with some sort of professionalism showing the reasons why mediation has succeeded or failed having regard to the fact that it is final and has a binding nature to the parties unless either of the parties dispute it within fourteen days of receipt thereof (see Clause 20. 2 of the Arbitration Agreement). This, in the end, will guide the arbitrator in the arbitration exercise. In this regard, the contention by Dr. Kapinga regarding the document at page 1184 is with due respect, not an opinion within its meaning as it is not reasoned. Since, the arbitration could not have taken place before the dispute was taken to the mediator for mediation and opinion, it means that by failure to give a proper opinion, the arbitrator could not have jurisdiction to entertain the arbitration. In our view, the omission by the mediator to give a binding opinion barred the arbitrator to proceed with the matter as the omission had the effect on both admissibility and jurisdiction of the arbitrator to entertain it. With respect, to the appellant's learned advocates7view that the opinion was only meant for admission of the dispute before the arbitrator for determination cannot be the correct position. Its bearing to jurisdiction is very crucial. In effect, the opinion from the mediator which was not reasoned, could not have clothed the arbitrator with jurisdiction to handle the matter. In our view, had the arbitrator interpreted the mediator's report as we see it, he would have not admitted the matter for arbitration. He ought to see it as not an opinion. As such, an arbitral award which is founded on no opinion by a mediator is another category of an improperly procured award, as it is the case before us. Suffices the point to dispose the appeal. On the manner the arbitrator has to act on matters brought to him for arbitration, we find that the decision of the High Court in the case of Kilimanjaro Oil Company Limited v. Tanzania Petroleum Development Corporation, [2023] TZHCC Com D 18 (17 February 2022) TanzLII. Miscellaneous Commercial Cause No. 25 of 2020, is persuasive to our case. In that case, it was held that: "An arbitrator is creature o f the agreem ent I f there is a specific prohibition in the agreem ent against entertainm ent o f claims, but in disregard o f such prohibition the arbitrator hears the m atter and makes an award, the arbitrator is g u iity o f iegai m isconduct...The arbitrator has no power apart from what the parties have given him under the arbitration agreement. I f he has acted outside the bounds o f the agreement, he has acted withoutjurisdiction. But if he has rem ained inside the param eters o f the agreem ent and has 14 construed the provisions o f the agreement, his award cannot be interfered with on ground o f want o f jurisdiction unless he has given reasons fo r the award disclosing an error apparent on the face o f it " The above cited authority emphasizes on the need for the arbitrator to act within the parameters of the arbitration agreement, otherwise he would lack the jurisdiction to entertain it. In our case, this is cemented by the fact that at a certain stage, the arbitrator stayed the arbitration to enable parties go for mediation before he could proceed with arbitration in compliance with Clause 20. 2 of the agreement. We ask ourselves, if a properly opined mediation was not important, why and how could the arbitrator refer it for mediation before proceeding with arbitration? Again, can it be taken that the mediator could be expected to bring to the arbitrator unreasoned opinion more so when taking into account that normally, the mediators would be professionals in the industry concerned? Just to show its importance, the arbitrator, when discussing the matter, he framed an issue, whether failure to refer the engineer's decision to a mediator for his opinion was a fundamental breach of the settlement of disputed procedure. In determining the said issue, he stated that: "I take this to be an agreem ent between the parties that this arbitration be stayed to afford the parties an opportunity to com piy with the requirem ent o f arbitration as provided in Ciause 20. 2 o f the Wet Works Contract between them. As m atters stand, I lack the jurisdiction to hear and determ ine the dispute untii such tim e when the parties have com piied fu iiy with a ii stages required before the dispute is subm itted to arbitration. "[Em phasis added] We wish to emphasize here that, the arbitrator found to have no jurisdiction if the matter had not been attended by a mediator first as a certain stage would have been skipped. If we may add, we think that, if such stage was of such importance, it does not make sense if the opinion of the mediator under clause 20.2 of the agreement envisaged an opinion in the form of giving the end result of the mediation casually without any reasons on how the mediator arrived to that conclusion. It would have been more meaningful if such opinion was reasoned. We also note that, the counsel for the appellant, adamantly, assailed the respondent for failure to raise the issue of unreasoned opinion earlier, otherwise, she be taken to have waived such right. However, we think 16 that the argument is respectfully misplaced. In our considered view, since the issue of opinion has a bearing on the issue of jurisdiction which is a point of law, and it can be raised at any time. See: Salum Ally Salum v. Republic, Criminal Appeal No. 9 of 2021 [2023] TZCA 17668 (29 September 2023) TanzLII. In this regard, since the arbitrator heard and determined the arbitration without being properly clothed with jurisdiction for lack of a reasoned opinion from the mediator, he acted without jurisdiction. This omission no doubt resulted to an improperly procured arbitral award. It contravened clause 20.2 of the agreement, hence, a manifest error on the face of the award. In the result, we find merit in the first ground of appeal. We now turn to the issue whether the High Court Judge had mandate to set aside the arbitral award. Our starting point will be to revisit the law which guides this aspect. On this we have in mind sections 14, 15 and 16 of the old Arbitration Act which provided as hereunder: "14. The tim e for making an award may, from time to time, be extended by an order o f the court whether the tim e for making the award has expired or n ot 15 (1) The court may from tim e to time, rem it the award to the reconsideration o f the arbitrator or umpire. 17 (2) Where an award is rem itted, the arbitrator or umpire shall, unless the court otherwise directs, make a fresh award within three months after the date o f the order rem itting the award. 16. Where an arbitrator or umpire has m isconducted him self or an arbitration award has been im properly procured, the court may set aside the aw ard." [Emphasis added] From the above cited provisions of the law, the powers of the court (the High Court) are limited to extend time for making an award in case the time for making it has expired; to remit the award to the arbitrator for reconsideration and the time within which such reconsideration is to be made; and to set aside the award where the arbitrator has misconducted himself or the arbitration award is improperly procured. We understand that, whereas Dr. Kapinga was not convinced on grounds of setting aside the arbitration award and more so, the order for re-arbitration by another arbitrator, the counsel for respondent held a view that it was proper for it to be set aside as the arbitrator lacked jurisdiction. On our part, having considered the rival arguments on this issue, we are satisfied that the order of the High Court Judge setting aside the arbitration award was, indeed, within the dictates of section 16 of the 18 Arbitration Act. As we have alluded to earlier on, the arbitrator proceeded with hearing and determining the matter without having the required jurisdiction. As observed before this had the effect not only of procuring an improper award but also occasioning an error manifest on the face of the award. On this we are fortified by the decision in the case of Vodacom Tanzania Limited v. FTS Services Limited (Civil Appeal No 14 of 2016) [2019] TZCA 514 (27 December 2019), when the Court was confronted with almost akin situation, it had this to say: 'We are highly persuaded by the above position being a construction o f the provisions o f the Kenyan iaw which are in pari-m ateria with section 16 o f the A ct (Arbitration Act). Thus, the power to set aside an award, as we explained earlier, is not lim ited to an arbitrator's personal m isconducted but it extends to cases invoiving errors m anifest on the face o f the award. While we agree that the Court's power under the A ct is m ainly supervisory, it is not correct that such pow er to review and set aside an award can only be applied in cases o f unfairness and injustice in the arbitration process. We need not reiterate that the said pow er is exercisable in cases 19 o f m isconduct o f the arbitrator or im proper procuring o f the award or where there is an error on the face o f the aw ard." See also: CATZC International Engineering T. Ltd vs University of Dar es Salaam (Civil Appeal No.162 of 2020) [2023] TZCA 17338 (13 June 2023) TanzLII. According to the above cited authority, the power of the High Court to set aside the award is not only limited to the grounds of misconduct of the arbitrator or procurement of an award improperly but also if there is an error on the face of the award. Of course, we think, our situation may not fall within the ground of the arbitrator's personal misconduct. However, we are of a considered view that it falls within the ground of procuring an award improperly and occasioning an error of the face of the award. Guided by the above authority, we find that the act of the arbitrator for hearing and determining the arbitration without having the jurisdiction amounted to the procuring an award improperly. We also note that, Dr. Kapinga took an issue to whether the High Court Judge was mandated to order for a re-arbitration. We think, this issue must not detain us much. In our view, the Judge correctly made 20 such order. Part of the said order appearing under item 3 at page 1709 of the record of appeal reads: 3. The dispute between the parties shaii be expeditiously re-arbitrated by a new arbitrator duly selected with and agreed on by the parties and the arbitrator so selected or appointed by the body sh all assume his role after com pliance o f proper m ediation procedure as per the p arties' contract under clause 2 0 .2 " Our understanding of this order is that, it was consequential to his order setting aside the proceedings and award for lack of jurisdiction. We think, after having set aside the award, the arbitrator would not have ended there as the parties would not have known their way forward. Fortunately, the said order, directed re-arbitration by another arbitrator to be selected the parties. It also directed explicitly for the re-arbitration to proceed after compliance of the proper mediation as per Clause 20.2 of the Arbitration Agreement. In our view, if the mediator's report at page 1184 was a sufficient opinion as envisaged in the Arbitration Act, the learned Judge would not have ordered so. Flowing from our finding made earlier on, it is clear to us that the arbitrator lacked jurisdiction for lack of a reasoned opinion from the mediator. It means that, the arbitrator would take his role after a proper opinion of the mediator is availed to him. We, therefore, do not find any wrong that was committed by the High Court Judge in so ordering. In view of the foregoing, we are satisfied that the appeal is devoid of merit. We, accordingly, dismiss it with costs. It is so ordered. DATED at ARUSHA this 28th day of February, 2025. R. K. MKUYE JUSTICE OF APPEAL S. M. RUMANYIKA JUSTICE OF APPEAL G. J. MDEMU JUSTICE OF APPEAL The Judgment delivered this 28th day of February, 2025 in the presence of Mr. Rodgers Godfrey Mlacha holding brief for Mr. Wilbert Kapinga, learned counsel for the Appellant and Mr. Richard Evance Manyota holding brief for Elvaison Maro, learned counsel for the Respondent; is hereby certified as a true copy of the original. 22