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BENDEL FEED AND FLOUR MILLS LTD
SEABOARD SALES CORPORATION
GEORGE ADESOLA OGUNTADE, JCA (Presided and delivered the leading judgment)
CHRISTOPHER MITCHELL CHUKWUMA-ENEH, JCA
AMIRU SANUSI, JCA
BENDEL FEED AND FLOUR MILLS LTD
Prof. A.B, Kasumu S.A.N with Messrs D. A. Awosika and B. O, Balogun for the appellant.
Dr. B. O. Babalakin with Messrs O. Akoni, B. Owumi and Mrs. E. Olotu for the respondents.
ALTERNATIVE DISPUTE RESOLUTION – ARBITRATION – Jurisdiction of an arbitrator – when in issue – whether can be put in issue by privity of contract and the existence of a contract.
COMMERCIAL LAW – CONTRACT – Entirety of a contract – binding effect of same on parties.
COMMERCIAL LAW – CONTRACT – International contracts – need to ensure that Nigerian Companies perform their obligations thereunder.
PRACTICE AND PROCEDURE – JUDGMENT AND ORDER – Reliefs not sought by parties – propriety of court granting same.
GEORGE ADESOLA OGUNTADE, JCA (Delivering the leading judgment): In suit No. M/182/99 before the Lagos High Court, the appellant was the applicant and by its amended originating summons issued on 22-10-99 prayed for the following:-
“(1). An order that the series of arbitral awards listed in schedule 1 hereunder given in the United Kingdom in favour of the defendant herein by an arbitration panel comprising F.F. Nicholls (chairman), R.A. Barber, J.C. Belton, K.E. Hairs and J.B. Rose be not recognized and enforced in Nigeria as same is contrary to the public policy of the Federal Republic of Nigeria.”
The awards in respect of which the appellant sought the prayer were identified as the following:-
“(1) Award No. 3775 in respect of contract No. 1760 dated 6th May, 1996.
(2). Award No. 3776 in respect of contract No. 1846 dated 25th July, 1996.
(3). Award No 3777 in respect of contract No. 1789 dated 19th May, 1996.
(4). Award No 3778 in respect of contract No. 1807 dated 22nd May, 1996.
(5). Award No 3779 in respect of contract No.l807 dated 22nd May, 1996.”
The grounds relied upon by the appellant for praying that the award be not recognized were stated thus:-
“(1). The contract forming the basis of the arbitral award are (sic) illegal and unenforceable.
(a) The respondent together with a swiss company known as Contracom Commodity Trading AG with a view to circumventing a governmental policy of the United States of America on wheat subsidy procured and used the applicant’s name to front as buyers of the consignment of wheat, the supply of which formed the basis of the alleged contracts.
(2) Fundamental issues raised by the applicant before the arbitration panel as to its liability under the alleged contracts and the capacity in which it was sued are not capable of settlement by the arbitration panels.
(3). Recognition and enforcement of the arbitral awards will be illegal in that the respondent seeks to claim damages in respect of the supply of wheat under the alleged contracts which the respondent and Contracom Commondity Trading AG know were not to be wholly shipped to the applicant in Nigeria and could therefore not have covered any customs documentation such as to entitle the respondent to payment under the Nigeria Exchange Contract Act, 1990.”
The appellant filed a 89 paragraph affidavit in support of the application and annexed thereto several documents as exhibits. The respondents on 22-11-99 filed a counter affidavit consisting of 18 paragraphs. Several documents were also annexed as exhibits. The lower court heard arguments on the application. The trial Judges Fafiade J. in the concluding part of the ruling said:-
“Parties have entered into agreement as to the mode of settling any dispute or transaction between them, I find no basis for either party to renege on the agreement. There is therefore no bais for not recognizing the awards. I hold that the awards are recognizable and enforceable against plaintiff, it is therefore so ordered.”
Dissatisfied with the ruling of the lower court, the appellant has brought this appeal. In the appellant’s brief filed, the issues for determination were identified as the following:-
“(1). Was the trial court right in refusing to grant the relief sought by BFFM that the arbitral panel lacks jurisdiction to adjudicate on the issues raised by BFFM that it is not a party to the various contracts and is thus not subject to the arbitration clause in the various agreements.
(2). Even if the arbitral panel had jurisdiction, was the trial court right in holding that BFFM was the buyer in the various contracts forming the subject matter of the dispute before the court.
(3). Was the trial court right in holding that recognition and enforcement of the various awards in Nigeria will not be illegal or against public policy of Nigeria.
(4). Was the trial court right in ordering that the various awards be recognized and enforced in Nigeria when there was no application by the respondents for the recognition and enforcement of these awards.”
The respondents’ two issues were these:-
“3.1. Whether in the circumstances of this case, and on the materials placed before it, the court below was correct to have refused the appellant’s originating summons.
3.2. Whether the court below was wrong to have ordered that the awards are recognizable and enforceable against the appellant and if so, whether any miscarriage of justice has been occasioned to the appellant thereby.”
Before I discuss seriatim the issues raised by the appellant, I intend to give exposure to the facts which the appellant placed before the lower court in support of its application that the awards made in favour of the respondent be not recognized. The case of the appellant in a summary went thus:
The appellant, a company incorporated in Nigeria, operated a Flour Mill in Nigeria and relied mainly on the imported wheat while a company known as Contracom Commodity Trading AG (hereinafter described as CCT) traded in wheat. CCT supplied wheat to the appellant in Nigeria and bought some of the wheat from respondents. The United States of America had a programme by which wheat was sold to some countries at subsidized prices. CCT and respondents had an understanding whereby wheat, at subsidized prices, under the U.S.A programme were bought by CCT from the respondents for resale to beneficiary countries under the U.S.A. policy guidelines. Both respondents and CCT made contracts for purchase of wheat and inserted thereon the name of the appellant as the importer buyer in order to take advantage of the subsidized wheat programme of the U.S.A. The appellant did not sign the contracts although appellant’s name appeared on the contracts as the buyer. The appellant finally deposed in paragraphs 31 to 34 of its affidavit in support of the application thus:
“31. That although CCT was the main supplier of wheat to the applicant, the contractual relationship between the parties was on an ad-hoc basis i.e as and when the appellant required the supply of wheat for its use.
(a) Consignment of wheat which the applicant never placed orders for:
(b) Consignment of wheat which never reached and was also not intended to come wholly or partly into Nigeria.
The respondents’ case on their counter-affidavit was that the appellant was aware and had consented to be a party in all the five contracts in respect of which arbitral awards were made against the appellant. It was deposed that the five contracts were part of the six series identical in all respect except for the quantity and cost; and that in a court dispute in the United States arising from one of them i.e. contract ref. No. S. 1720, the Managing Director of the appellant deposed that the appellant entered into the sales contract. It was further deposed that the contracts in respect of which the arbitral awards were made were in respect of Argentine wheat which had nothing to do with the United States of America wheat export subsidy. It was also stated that in another court proceeding in Kansas, U.S.A., the appellant’s attorney represented that Mr. Frank Baehr had the authority to enter into contract with the respondents on behalf of the appellant. The respondents also denied the truth of most of the depositions in the affidavit in support of the application.
Section 52 of the Arbitration and Conciliation Act Cap. 19, Laws of the Federation, 1990 under which the appellant brought its application before the lower court provides:
“52. (1) Any of the parties to an arbitration agreement may request the court to refuse recognition or enforcement of the award.
(2) The court where recognition or enforcement of an award is sought or where application for refusal of recognition or enforcement thereof is brought may, irrespective of the country in which the award is made, refuse to recognize or enforce an award –
(a) if the party against whom it is invoked furnishes the court proof-
(i) that a party to the arbitration agreement was under some incapacity, or
(ii) that the arbitration agreement is not valid under the law which the parties have indicated, that the arbitration agreement is not valid under the law of the country where the award was made, or.
(iii) that he was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise not able to present his case, or
(iv) that the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or
(v) that the award contains decisions on matters which are beyond the scope of the submission to arbitration, so however that if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced, or
(vi) that the composition of the arbitral tribunal, or the arbitral procedure, was not in accordance with the agreement of the parties, or
(vii) where there is no agreement between the parties under sub-paragraph (iv) of this paragraph, that the composition of the arbitral tribunal, or the arbitral procedure, was not in accordance with the law of the country where the arbitration took place, or
(viii) that the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, the award was made; or
(b) if the court finds –
(i) that the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Nigeria, or
(ii) that the recognition or enforcement of the award is against public policy of Nigeria.”
The contention of the appellant under its first issue is that the lower court was mistaken by not upholding the argument that the appellant was not a party to the contracts in respect of which the arbitral awards were made. Appellant’s contention was hinged on section 52 (2)(b)(1) of Cap 19 above. Appellants’ counsel relied on (1) Heyman v. Darwin Ltd. (1942) A.C. 356 at 366 and Toller v. Law Accident Insurance Society Ltd. (1936) 2 All ER 952. In the later case, the court held:
“Since, if the issue were referred to arbitration a finding by the arbitration that there was no contract in existence as at the date of the accident, would be a finding that the arbitration clause never existed and that the arbitration never had jurisdiction to deal with the matter, the issue was a proper one to be tried in the court,”
It seems to me right in principle that if a party contended that it is not a party to a contract, in which an arbitration clause was a term, that was a matter that fell to be determined by the court. Such contention puts the jurisdiction of the arbitrator in issue. However, in the case on hand the relevant contracts showed that the appellant was named as the buyer, of the wheat and the respondents the seller. In paragraphs 15, 16, 17, 18, 24 and 25 of the affidavit in support of the applications the appellant deposed:
“15. That although the applicant was stated as buyer on the various contract documents, the contracts were in fact never signed by the applicant but by one Frank Baehr, the president of CCT who purportedly signed on behalf of the applicant.
I7. That although the applicant eventually became aware of the use and insertion of its name on the documents, it was never the intention and/or understanding of the applicant, CCT or indeed the respondents that the respondents would have recourse to the applicant for payment for any of the wheat covered by the various contracts.
From the appellants showing, it is apparent that it was its grouse that Frank Baehr fraudulently signed the contracts on behalf of the appellant. The appellant knew that Frank Baehr was president of CCT and that CCT at the time was selling wheat to it. In otherwords, Frank Baehr was both the seller vis-a-vis CCT and the buyer vis-a-vis BFFN (the appellant). The appellant by its own mouth confessed that it knew of the arrangements which were resorted to enable wheat to be purchased under the American government wheat export subsidy programme. Surely, the appellant must have its reasons for going along with such arrangements.
Now, the wheat the subject-matter of this dispute was Argentine and not American. Considerations of some subsidy did not therefore apply. Why did the appellant continue to allow Frank Baehr to sign contracts for Argentine wheat on its behalf?
The facts and circumstances of this case raise a plethora of questions as to the capacity in which Frank Baehr signed the contracts. It is important in the consideration that the appellant knew what Frank Baehr was doing on its behalf and objected. In Freeman & Lockyer v. Buckhurst Park Properties (Magna) Ltd. (1964) 2 Q.B 480 at 503, Diplock L.G. observed.
“an “apparent” or “ostensible” authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the “apparent” authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal himself from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract.”
The point to note here is that the appellant when it was importing wheat from the U.S.A had allowed Frank Baehr to place its name on the contract documents as the importer and had signed the contracts on its behalf. There was therefore no reason for the respondents to believe that the said Frank Baehr had no authority to sign the contract forms for the appellant on the importation of Argentine wheat. The lower court at page 704 of its ruling said:
“I find plaintiff/applicant is the buyer in all the 6 contracts have been rightly held to be so in the arbitration award. The arbitration in the circumstances find plaintiff/applicant liable and consequently made awards against them.
This settles the issue of capacity and liability.”
It is difficult to disagree with the opinion of the lower court in the circumstances. This is in view of the fact that the contract documents were signed by Frank Baehr who purported to have done so on behalf of the appellant. To be able to show that it did not sign the contract documents, the appellant needed to show that Frank Baehr signed them fraudulently; or that he exceeded his authority when he did so. But the available evidence to be garnered from previous transactions in relation to the importation of wheat from U.S.A conveyed that the appellant not only authorized Mr. Frank Baehr to sign for it but ratified the act. I therefore decide the first issue against the appellant.
The second issue is closely related to the first. In the second, the appellant queries whether the trial court was right in holding that the appellant was the buyer in the various contracts forming the subject matter of the dispute. It was the argument of the appellant’s counsel that the trial court should not have relied on exhibit S1 on pages 537-539 of the record. Exhibit S1 is an affidavit deposed to by Knut Baehr in respect of a suit arising out of contract No.. S-1720 in the District Court of Pennsylania. Mr. Knut Baehr swore the affidavit as the Managing Director of the appellant in respect of a contract connected in circumstances and time with the contracts that were the subject matter of the dispute in this case. He further deposed that the appellant and respondents entered into contract for the purchase of wheat and that the appellant nominated a vessel to carry the cargo from Argentina to Ghana.
In the current case, the appellant was contending that it did not enter into the contracts of which contract S-1720 was a part. The argument of counsel was that the affidavit deposed to in another proceedings ought not have been accepted in evidence in the current proceedings; and that the previous affidavit could only be used to cross-examine the witness who made the previous statement. I think that the argument of appellant’s counsel is right. This was a hearing conducted by affidavit evidence. There was therefore no opportunity however to file a reply affidavit to explain the circumstances which led to a change of position on its part. The implication for the case of the appellant was to lead the trial court to believe that the appellant’s depositions as to whether it was the buyer of the wheat were untrue or unreliable. The respondents attempt by tendering exhibit S1 was to show that the appellant took a position different from that it had taken at the court in U.S.A. Appellant’s counsel also argued that if the court found that an admission made before it did not represent the true facts, the court should not hold itself bound by the admission.
Counsel relied on Whall v. Bulman (1953) 2 QB 198 at 203 and 225; Gramophone Co. Ltd v. Magazine Holder Co.(1911) 28 R.P.C. 221 and Seismograph Service Nigeria Ltd. v. Eyuafe (1976) NSCC 547. It is further argued that the trial Judge should not have relied on a letter exhibit S2 written by appellant’s attorney. It is also the contention of appellant’s counsel that the lower court should not have placed reliance on the proceedings before the Kansas Court to reach the conclusion that the appellant was the buyer.
With respect to appellant’s counsel, I think that his submissions overlook the basis underlying structure of the case the appellant brought before the lower court. The appellant’s name appeared in all the documents for the six contracts as the buyer. The appellant admitted that it knew its name so appeared. The appellant did not object to its name being used as importer for the wheat of the United States origin. According to the appellant, the arrangements were resorted to take advantage of the United States wheat subsidy programmed for some beneficiary countries of which Nigeria was one. With respect to the wheat of Argentine origin, the same arrangements were followed although consideration of subsidized price did not arise. Once the decision is reached that the appellant signed the contracts either by itself or through someone it held out as its agent, the appellant must be held to its obligation arising from the contracts as a buyer.
“The arguments that the trial court sho ld have discountenanced the proceedings in the Kansas court, the affidavit of Knut Baehr and the letter by appellant’s attorney could only have carried weight if there were no contracts before the trial court which the appellant tried to make irrelevant. In this connection, I bear in mind the reasoning of the trial Judge at page 702 of the record of appeal thus:
“The issue of the series of awards is in respect of default for non performance of the 5 contracts and which the awards were made by the alleged buyers the applicant. Although the applicant denied liability at both hearing because
(1) It was not a party to any of the contract with the respondents.
(2) It at no time paid respondent for any contract.
(3) Being called the buyer was a mere titular head.”
The arbitration at first hearing and at the appeal did not agree with this posture of the applicant on the finding that,
“(1) applicant allowed its name to be used in the American contracts knowing very well that it could benefit from EEP expert subsidy.
(2) even after this benefit ceased to exist it still allowed itself to be named as the buyer in the Argentine contract’s.
(3) applicant took delivery on contract 1720 whether in part or wholly on the contract in which it was named the buyer.
(4) Absolute denial by CCT of any contract between it and respondent or any arbitration agreement between it and respondent. Applicant was consequently found liable for defaulting in performing the contracts being the buyer. I cannot agree more with this finding.”
The position taken by the appellant is unsupportable. Contracts entered into by parties have both their onerous and beneficial parts. Appellant must stand up to both. It cannot when it suits it accept the contract terms while rejecting the terms when they do not suit it. I resolve issue two against the appellant.
The appellant’s 3rd issue raises the question that the awards by the arbitrators were unenforceable on the ground of illegality and or public policy. I have in this judgment resolved that the appellant entered into the contracts with the respondents. I have also held that the appellant was the buyer in the contracts. Was there anything illegal or against public policy of Nigeria in the contracts? I think not. The contracts ex -facie were simply for the purchase of Argentine wheat by the appellant, a Nigerian Company. The nature of i1legality and or public policy relied upon by the appellant was stated thus:
“Recognition and enforcement of the arbitral awards will be illegal in that the respondent seeks to claim damages in respect of the supply of wheat under the alleged contracts which the respondent and Contracom Commodity Trading AG knew were not to be wholly slupped to the applicant in Nigeria and could therefore not have covered any customs documentation such as to entitle the respondent payment under the Control Act, 1990.”
It seems to me that the facts presented before the trial court support the position taken by the appellant. Nothing in the contracts imposed any obligation not to wholly import the consignment into Nigeria or better still, nothing therein imposed that appellant must ship part of the consignment else where other than Nigeria. On the contracts, the appellant was the buyer and as a buyer the appellant possessed the right to do what it pleased with its consignment, It is the manner in which the obligations under the contracts were performed that might or might not run contrary to law.
It is purely speculative to say that the performance of the contracts would amount to an infraction of the Nigerian Exchange Act, 1990. Certainly the contracts were not framed to have the effect. If the appellant pleased, it could re-export the wheat to any other country after they had reached Nigeria. It could do what it pleased with its wheat. The wheat under the contracts were to be paid for by irrevocable sight letter credit. When the duty to pay arose, appropriate documents would need to be produced. That stage was reached in this case. In this connection, I find the argument on pages 16 & 17 of the respondent’s brief an appropriate reply to appellant’s contention.
“Is it being suggested that exchange control regulations and public policy in Nigeria will permit a Nigerian company to enter into a contract with a foreign company to purchase goods from that foreign company, (the contract not specifying the destination of the goods) and then receiving part therefore in Nigeria and dispose of the rest to other African countries and then refuse to pay for the goods on the grounds that not all the goods were received and used in Nigeria? Certainly, no such public policy exist in Nigeria and the courts must not be stampeded into establishing such. The exchange control regulations do not permit such action. In any event, this is not what happened in this case. The appellant entered into contracts for the purchase of wheat at a future date at fixed prices. It was required to nominate a vessel to carry the wheat at a specified time. The appellant failed to nominate the vessel and take the wheat so that in effect, the contracts were not performed. The respondents made a claim against the appellant for breach of contract and after the arbitration, an award was made in favour of the respondents. Is it against Nigeria’s public policy for Nigerian companies to ensure that Nigerian companies honour their agreements? It certainly isn’t. Rather it is Nigerian’s public policy to ensure that Nigerian companies honour their international obligations as the contrary would only result in Nigeria becoming a pariah nation in the comity of nations. It would only bring the nation into disrepute if our courts allow Nigerian companies to enter into agreements with international parties, breach the same and run home to hide under some non-existent public policy. Public policy has been said to be an unruly horse and is sometimes incapable of definition, hence parties have tried to expand its meaning to cover almost anything and everything possible.”
On the available facts, I cannot identify anything which was illegal or contrary to public policy in Nigeria in the contracts the subject-matter of the arbitral awards. We are now in era of globalization in world commerce. Companies in different countries of the world freely and more speedily transact business in the assurance that obligations will be respected. The new age advance communications system ensures expedition in the matters. It will be destroying the entrepreneurial spirit of Nigerians if I were to uphold an alleged public policy which enables Nigerian companies to escape their contractual obligations to foreign companies. The predictable result is that foreign companies will shun doing business with Nigerian companies, There is nothing whatsoever in the contracts in this case even remedy suggesting any illegality or that may be construed as against public policy in Nigeria. What I see here is that the appellant, a Nigerian company entered into contracts with the respondents to buy Argentine wheat, and defaulted in the performance of its obligations under the contract. I decide issue 3 against the appellant. The last issue relates to whether or not the lower court was right when it ordered that the arbitral awards be enforced. It was appellant which brought before the trial court an application that the arbitral awards be not enforced and recognised. If the trial court thought that the originating summons had no merit, all it had to do was dismiss it. The trial Judge however went further than that. At page 706, it said
“I hold the awards are recognisable and enforceable against plaintiff, it is therefore so ordered.”
I ought to delete the last sentence “It is therefore s ordered.” The respondents did not bring before the lower court an application for such prayer. The respondents have argued, that no miscarriage of justice could result from that order. I think otherwise. The Arbitration and Conciliation Act, Cap 19 in its section 31 makes provisions for a person in whose favour an arbitral award was made to bring an application for the enforcement of the award. On the hearing of such application, the person against whom the award was made will be entitled to a hearing. In the instant case, the appellant had not the opportunity to react to such application. It would be speculative to believe that the appellant in an application by the respondents to enforce the award would have said the same thing it said in advancing its summons that the awards be not recognised. A court has no jurisdiction to grant a party a relief not sought of it or more than was sought of it.
This appeal partially succeeds. The order by the court that the awards be enforced is deleted. In other respects the appeal is dismissed. The respondents are awarded N5,0000.00 as costs.
CHRISTOPHER MITCHELL CHUKWUNA-ENEH, JCA.: I am content to leave the matter as ably stated by Oguntade JCA with whose lead judgment in this matter I am in entire agreement. Thus, this appeal partially succeeds and I subscribe to the consequential orders contained therein.
AMIRU SANUSI, JCA.: I had the advantage of reading in draft the judgment just delivered by my learned brother Oguntade JCA. The reasoning and conclusion reached therein are in accord with mine. I adopt them and also hold that the appeal is partially meritorious. It therefore succeeds in part. I endorse the consequential order made in the lead judgment and award same cost as awarded in the leading judgment.
Cases referred to in the judgment
Freeman & Lockyer v. Buckhurst Park Properties (Magna)Ltd. (1964) 2 Q.B 480.
Gramophone Co. Ltd v. Magazine Holder Co.(1911) 28 R.P.C. 221.
Heyman v. Darwin Ltd. (1942) A.C. 356.
Seismograph Service Nigeria Ltd. v. Eyuafe (1976) NSCC 547.
Toller v. Law Accident Insurance Society Ltd. (1936) 2 All ER 952.
Whall v. Bulman (1953) 2 QB 198.
Statute referred to in the judgment
Arbitration and Conciliation Act Cap 19 Laws of the Federation 1990; section. 31 & 52