off route technologies ltd another vs magamba coal ltd 3 others 2011 tzhccomd 2103 19 july 2011

IN THE HIGH COURT OF TANZANIA (COMMERCIAL DIVISION)

AT PAR ES SALAAM COMMERCIAL CASE NO. 14 OF 2011 OFF ROUTE TECHNOLOGIES LIMITED......................... 1s t PLAINTIFF GORDON BROWN.......................................................... 2n d PLAINTIFF

VERSUS MAGAMBACOAL LIMITED..................................................................1s t DEFENDANT EARLING JOHANSEN.......................................................................... 2n d DEFENDANT GENERAL ROBERT P. MBOMA............................................................ 3r d DEFENDANT ROLF GIESING..................................................................................... 4t h DEFENDANT

RULING BUKUKU, J. By an Investment Agreement dated 12th November, 2009, Plaintiffs and defendants negotiated and executed an agreement for Investment into the 1st defendant company. It was agreed that, Plaintiff was to supply for lease, various equipment and machinery to the 1st defendant for its operations. In return, the 1st Defendant would pay for the leased equipment, also in that Agreement there was a share acquisition offer whereby, upon plaintiffs being allotted shares in the 1st defendants Company, then 1st defendant would be entitled to acquire the leased equipment for the sum of USD.1 only. The Investment Agreement also provided, among other things, that the law governing the agreement shall those of the United Republic of Tanzania and in the event of any dispute controversy or i claim arising out of or relating to the agreement or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the Arbitration Act (Cap 15). The defendants allegedly breached the terms of the Investment agreement and the plaintiffs brought this suit in this Court. The defendant intending to refer the dispute to arbitration, filed a petition under Section 3 and 6 of the Arbitration Ordinance (Cap 15) and Rules 5 and 6 of the Arbitration Rules 1957 praying this Court to order stay of all proceedings pending a reference to arbitration pursuant to clause

9.2 of the Investment Agreement, or under discretionary provisions of Section 6 of the arbitration ordinance (Cap 15). In answer to the petition, plaintiffs raised two points of preliminary objection namely: (i) That the petition is incurably defective for being bad in form; (ii) That, the petition is incurably defective for lack of proper attestation by the parties Simultaneously with the filing of the petition, defendants also raised two points of preliminary objection namely: a) The plaint is not admissible as it does not have original signatures; b) The affidavit in support of the Chamber application is fatally defective in that: (i) The attestation page is different from the main body of the affidavit. (ii) The signatures are not original as signed by the affidavit (iii) The averments therein made are not congruent with its annexure. Therefore, they prayed the application for injunctive orders filed on 21st Februarty,2011, be dismissed with costs. Both Counsels appeared before me on 29th March, 2011 and were allowed to orally argue their positions. Ms. Kirethi argued for the plaintiff while Dr. Ringo appeared for the defendants. 2 Ms. Kirethi, Counsel for the plaintiff assailed the preliminary objection by stating that, the petition filed by the defendants is curably defective for being bad in form and for lack of attestation; that, the law firm of ADEPT Chambers or its

lawyers are incompetent to act for defendants for reasons of conflict of interest in that they previously acted for and advised the defendants and finally the application for security for costs is incurably defective for it is based on improper citation of the law. She therefore prayed that the petition be dismissed with costs. In rebuttal, Dr. Ringo, Counsel for the defendants brought to the attention of the Court that, the plaint filed by the plaintiff is not admissible since it was defective in form and substance and therefore he prayed that the application should collapse and be struck out. As for the suit itself, Dr. Ringo submitted that, the parties had agreed under the Investment Agreement that any dispute or claim arising from that Agreement, they will subject themselves to arbitration. Responding to the rebuttal, Ms. Kirethi argued that, the petition was fatally defective for non citation of the specific rules. She submitted that, there is a Plethora of authorities which have held that an applicant must refer to a specific Section under which an application is preferred. She cited the case Edward Bachwa & 3 others V. AG another Civil Appeal No.128 of 2006 CA (unreported). Where Rutakangwa, J. held that an application for leave to appeal was not proper because the notice of motion was based on improper citation of the law and the application was struck out. On the same

vein, she cited the case of the print factory Ltd V. Hyderbad E.A. Ltd, in Miscellaneous Commercial Case No. 18 of 2009 (Unreported) where Makaramba, J held that, citation of omnibus provisions of 0. 25, without citing the sub rule, is not proper. The petition in question here has been preferred under Section 3 and 6 of the Arbitration Ordinance (Cap 15) and Rules 5 and 6 of the Arbitration Rules, 1957). Admittedly, rule 3,5 and 6 are supplemental provision to rule 6 which is the proper provision. She surmised that, the petition filed is defective in that it did not have an accompanying affidavit to support it. She said that, a petition is as good as an application made under the CPC and therefore it must be accompanied by an affidavit. Responding, Dr. Ringo submitted that, with regard to the wrong citation of the law, there are authorities from our Courts to the effect that citations are fatal (i) if wrong provisions are cited; (ii) there is failure to cite the law; and (iii) where the citation is omnibus. He further submitted that, the application for security for costs does not fall under those 3 categories, and therefore it is the duty of the Courts to do justice without being fettered by procedure. He cited the case of Saggu V. Roadmaster Cycles (U) Ltd. 2002(E.A) 258, where it was held that where an application omits to cite any law at all or cites the wrong law but the

jurisdiction to grant the order exists, the irregularity or the omission could be ignored and the correct law inserted. Dr. Ringo summarized thus, matters of procedure are not so fundamental, the defect can be amended, by the Court exercising its powers under section 97 of the CPC. I have highlighted the major issue which both Counsels tried to iron out. I thank both Counsels for their very well thought of arguments. Now, the real issue before me is the preliminary objection raised by the plaintiff. I will not look into the form but just determine whether or not this point is capable of rendering the petition for stay of the proceedings incompetent. I had the opportunity of canvassing though submissions made by both Counsels. On the part of plaintiffs submission, she has not disputed the existence of the Arbitration Act, rather, she just attacked the petition filed by the Counsel for defendants. The first attack is on the issue of wrong citation of the law, i.e. The Arbitration Ordinance, On this I hasten to say that, it is true that, the proper citation of the laws in Revised Edition of the laws of Tanzania has since the coming into force of Laws Revision Act (Cap 4 R.E. 2002) been by Chapters of the laws appearing in the various Volumes of the Revised Edition of the Law. I agree with Counsel for plaintiff that, in the present petition therefore the proper citation of the applicable law would be the Arbitration Act, Cap 15 R.E.

2002. However, it is interesting to note that, the majority of practicing lawyers in the country are still grappling with these changes in citation of the laws. Occasionally, some practicing lawyers find themselves getting it wrong when citing the various laws in the Volumes in the Revised Edition of the Laws. This confusion is also visible in the present petition. Although Counsel for defendants has cited the applicable law as Arbitration Ordinance, albeit wrongly, this in my view has not occasioned any injustice or embarrassed the plaintiff. I am sure the plaintiffs know very well that what Counsel for defendants meant to cite was the Arbitration Act, Cap 15 R.E.

2002. In any event, the omission to cite properly the applicable law is not that fatal. For justice to prevail, this omission can very easily be cured by way of an amendment to the petition by inserting the law properly. As for the other issues raised by Ms. Kirethi, I have taken note. They are defects which are not fatal such that they do not go to the root of the matter and in my view they can be remedied. 4 Having disposed of the preliminary objection, I now turn to the issue on arbitration clause. It is this issue which will determine if this Court is vested with powers to determine the main issue. It is not disputed that the parties entered into an Investment agreement by which, among other things, had an arbitration clause. It is that arbitration clause in the Investment Agreement, which prompted the defendants to file a petition praying for stay of the suit, pending a reference to arbitration according to clause 9.2 of the Investment Agreement. I have also the duty to establish whether or not a fit situation exists to entertain this matter as required by section 6 of the Arbitration Act. The said section reads: “6. Where any party to a submission to which this part applies, or any person claiming under him, commences any legal proceedings against any other party to the submission or any person claiming under him ,............if satisfied that there is no sufficient

reasons why the matter should not be referred in accordance with the submission, and that there applicant was, at the time when the proceedings were commenced, and still remains, ready and willing to do all things necessary to the proper conduct of the arbitration, may make application for an order staying the proceedings”. As a general principle, parties to a contract are free to choose the law that would apply in the event of a dispute. In the case of Zagoritis Estates Ltd. V. W. J Tame Ltd & Another 1960 EA 384, - a case originating in Tanzania, - in considering a proper law of a Contract, it was held by the Court of Appeal of Eastern Africa that, whatever system of law it was intended, the parties should govern the contract. Again, the Court quoted with approval from Dicey’s Conflict of Laws (7th Ed) at page 1061 where it was stated in reference to arbitration proceedings: "It is well established that the Parties are free to determine what Law is to govern the submissions”. It follows, therefore that, parties to the case before me were free to agree that the law that was to govern their Investment agreement was to be that of the United Republic of Tanzania, and in any event of dispute or controversy, they will submit themselves to arbitration. 5 It has always been the practice that, Courts would respect and give effect to the intention of the parties to a Contract that in

the event of a dispute between them, they must go to arbitration. In the present case, the parties agreed that should an amicable settlement of a dispute or breach fail, the matter would be referred to and finally settled by arbitration. When the dispute in fact occurred between the parties, the plaintiffs came to this Court. The defendant, immediately filed in this Court a petition, arguing that the suit is incompetent and that the sanctity of the agreement has been violated. They are now asking this Court to stay all proceedings pending a reference to arbitration pursuant to clause 9.2 of the Investment Agreement or under the provisions of Section 6 of the Arbitration Ordinance (Cap 15). I am aware that, granting or refusing to give an order for stay is within the jurisdiction of the Court which should however be exercised judicially. This has been held in a number of cases including High Court Commercial Case No.211 of 2001, Ramada Investment Ltd V. Engen Tanzania Ltd; Commercial Case No.74 of 2002, Social Action Trust Fund Ltd V. New Northern Creameries Ltd. Construction Engineers and Builders Vs. Sugar Development Corporation (1983) TLR 13 and many others. With regards to the burden of proof, it is on the opposing party to establish that the effects of the arbitration clause should be departed from. Having Concluded so, I am of the considered opinion that, in filing the suit in Court without reference to arbitration, the plaintiff did not take cognizance of clause 9.2 of the Investment Agreement which contained the Arbitration Clause. It seems however that, such a course as was followed by the plaintiff is anticipated by Section 6 of the Arbitration Act Chapter 15 R.E.

2002. There are several reported cases in which a party to a submission went to Court without going to arbitration and often the question had been what remedy the other party to the submission could have. The remedy is provided in Section 6 of the Arbitration Act, that is to say, to apply for stay of the proceedings at the appropriate time, which in this case, Counsel for defendants has just done so. Duty then is to decide the nature of the dispute which has arisen and the next question is whether the dispute is one within the terms of the arbitration clause. In deciding to give effect to the understanding, the Court will not simply act on any clause however drafted or any set of facts: it has to establish first the nature of the controversy between the parties and then related to the Arbitration Agreement. The Court needs also to satisfy itself that on the set of facts and circumstance of the relevant case, stay of proceedings should or should not be granted. This is important because an arbitration 6 clause may be broad and comprehensive covering all types of disputes likely to arise out of a contract or parties may have decided to limit if to certain type of disputes or excluded others. Briefly, in the instant case the matters in dispute are set out in paragraphs 7.0 to 17.0 of the plaint. In the Investment Agreement, included is clause 9.2 which reads as follows:- 9.2 Any

dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the Arbitration Act, (Cap 15). Arbitration will be undertaken by three arbitrators, one arbitrator to be appointed by each of the parties in dispute and an umpire who is an auditor of not less than fifteen years standing in Tanzania appointed by the Chairman for the time being of the National Board of Accountants and Auditors (NBAA) in Tanzania. In the event that any party fails to appoint its arbitrator then the appointment of the non appointing party’s arbitrator shall also be under taken by the Chairman for the time being of the NBAA. The place of arbitration shall be Dar es Salaam and the language to be used in arbitral proceedings shall be in English.” Looking closely at this clause, one can say it is broad and comprehensive. The words, “Any dispute, controversy, or claim arising out of or relating to this agreement” Need no interpolation. It is wide enough to cover the present dispute. Having gone through the plaint, the only question is whether this is a fit case where the Court should exercise its discretion in favour of the defendants. Although arbitrators can decided both on question of law and facts, in certain situation where it is ascertained that the question of law can best be decided once

and for all by the Court or that the possibility of conflict of decisions or that it is expedient that multiplicity of proceedings be avoided, the Court would not refer the matter to arbitration. Be as it may I am satisfied that, the arbitration clause contained in the Investment Agreement covers all the issues in the plaint. The issues raised cannot be answered as questions of law without ascertaining all the surrounding facts, some of which may be technical and others may not. In my opinion, the dispute goes into the root of the Agreement. In this situation therefore, I am convinced that an order for stay is the only reasonable discretional route the Court can take. Why? Acting under the terms of the Investment Agreement, defendants filed a petition for stay of proceedings and have not 7 taken any steps in the proceedings so far. Also, defendants have shown willingness to settle the differences or to have a reference to arbitration pursuant to clause 9.2 of the Investment Agreement. Not only that, plaintiffs have never denied the existence of the arbitration clause in the Investment Arbitration in which the matters in controversy arose. A possibility of conflicting decisions in the event the suit is allowed to go on simultaneously, need no orchestration. This Court could be the architect of any chaos that may ensue. I am not prepared to fall into that error. Without further ado, this Court lacks the jurisdiction to entertain the suit filed by plaintiffs. The proceedings in this suit and all orders made under these proceedings are stayed pending a reference to arbitration pursuant to clause 9.2 of the Investment Agreement subsisting between the parties. Each party to bear own costs. It is ordered accordingly,

JUDGE 19 July, 2011 8