⦿ CASE SUMMARY OF:
Globe Spinning Mills Nigeria Plc v. Reliance Textile Industries Limited (2017) – CA
– Force Majeure;
– Misconduct in Arbitration;
Globe Spinning Mills Nigeria Plc
Reliance Textile Indutries Limited
Court of Appeal
⦿ LEAD JUDGEMENT DELIVERED BY:
⦿ LAWYERS WHO ADVOCATED
* FOR THE APPELLANT
– Mrs. Bimbo Adesanya, SAN.
* FOR THE RESPONDENT
– J. A. Osighala.
⦿ FACT (as relating to the issues)
By a Sale and Purchase Agreement dated 21st October 2006, the Appellant agreed to supply to the Respondent cotton yarn not less than 250 metric tones per month, while the Respondent agreed to take a minimum of 220 metric tones from the Appellant per month for a three year period, at a price stated in clause 6 of the agreement among other conditions as contained in the Agreement.
In the course of the contractual relationship, a dispute arose between the parties and pursuant to Clause 36 of the said Agreement; the Appellant by a letter dated 26th March 2009 gave the Respondent notice of arbitration.
Both parties appointed one Arbitrator each with a 3rd arbitrator to be chosen by the appointed two. The Appellants claim were as to loss of profit induced by the respondent.
The Respondent in denying liability pleaded force majeure and waiver of rights by the Appellant.
At the end of the Arbitral Proceedings, a final Award was made on 1st July, 2010 in favour of the Appellant.
Dissatisfied with the Award, the Respondent then filed the motion to set aside the Award. The learned trial judge in the Federal High Court heard the application and in its judgment set aside the Arbitral Award dated 1st day of July, 2010 on the ground that the Arbitral Panel misconducted itself by not considering the effects of Exhibits “BB, CC, and DD” as regards the issue of force majeure, hence this appeal.
1. Upon a proper perusal of the Arbitral Award dated 1st July, 2010, whether the Arbitral Panel did not consider the matters raised in Exhibits BB, CC and DD before making its reward?
2. Assuming but not conceding that the Arbitral Panel did not consider Exhibits BB, CC, and DD as to force majeure before making its award, whether a case of misconduct is accordingly made out against the Arbitral Panel?
⦿ HOLDING & RATIO DECIDENDI
1. ISSUE 1 WAS RESOLVED IN FAVOUR OF THE APPELLANT BUT AGAINST THE RESPONDENT.
i. The Arbitrators in their Award discussed in detail these Paragraphs (28 – 30) before reaching a conclusion that force majeure would not avail the Respondent.
It held inter alia:
“3.07. Two questions stand out for consideration: firstly do these eventualities constitute force majeure as contemplated by the parties in the agreement. Secondly have the other criteria stipulated in connection with force majeure been met to constitute valid force majeure, in other words did the respondent comply with the conditions stipulated as force majeure. As we stated above, the eventualities need not be tested by the four examples given in the agreement, they could be subjective but they need to comply as we stated with other conditions to be valid. The question now is, what are the conditions the respondent must show to bring their eventualities within the realm of force majeure in clauses 28 – 30 of the agreement.
3.08. It does seem to us that government has always been unable to curb illegal importation of textile fabrics before the agreement was executed by the parties. With any business it is foreseeable that market will contract and expand and it is difficult to anticipate the measure the “permanent loss of market” as alleged by the respondent. From the evidence given we were able to ascertain that there were alternative sources of energy which the respondent would use either in addition to or in substitution for gas at comparative cost.
3.09. Mounting cash loss and unsold stock are normal vicissitude of business which can easily be anticipated by companies. We are therefore of the opinion that these circumstances are not beyond the control of the respondent resulting in or causing a delay to or hindrance to in the fulfillment only in part of the fulfillment of the obligation of the respondent in the agreement which circumstances cannot be overcome by the exercise of due diligence on the part of the respondent.
3.10. The eventualities given by the respondent appear to be so fluid that the respondent cannot comply with the requirement that within a period of 48 hours of the event causing the force majeure the respondent must notify the claimant of such event.
3.11. It does appear also to us that the respondent did not diligently furnish such relevant information as is available concerning the events, Respondent in our opinion did not give the claimant the estimated period of time required to remedy the failure.
3.12. We therefore hold that force majeure based on the facts given by the respondent cannot be sustained. From the above, it would be seen that the Arbitrators took pains to discuss all the issues before coming to its conclusion. It would be a disservice to the Arbitrators if the Respondent argue that they did not consider Exhibits BB, CC, DD before reaching their conclusion.”
2. ISSUE 2 WAS RESOLVED AGAINST THE RESPONDENT BUT IN FAVOUR OF THE APPELLANT.
i. The Respondent had to prove convincingly that the Arbitrators really misconducted themselves during their deliberations. The Respondent only said that the Arbitrators did not make use of Exhibits BB, CC, DD. There was no concrete evidence that the Arbitrators did not utilize the said exhibits.
⦿ SOME PROVISIONS
⦿ RELEVANT CASES
To find out what misconduct is, I will refer to the case of Triana hold v. U.T.B. Plc (2009) LPELR 8922 where the Court of Appeal discussed misconduct and held as follows: “The word misconduct’ has not been defined in the Act or what would amount to misconduct on the part of an arbitrator to necessitate the setting aside of his award. But the Court is not without guidance. The Apex Court in Taylor Woodrow Nig. Ltd. v. SEGMBH having had recourse to the common Law has determined what constitutes misconduct. Several instances have been listed though it cannot be said to be exhaustive. I think each case should be treated based on its peculiar facts to determine whether or not an arbitrator has misconducted himself. Where an arbitrator has done anything either expressly or impliedly for which a reasonable by-stander would conclude that he has not been fair to both parties, I think such act of the arbitrator would qualify as a misconduct for the avoidance of doubt, the following instances enunciated in the above case will certainly constitute acts of misconduct, that is to say:
(1) Where the arbitrator fails to comply with the terms, express or implied, of the Arbitration Agreement;
(2) Where even if the Arbitrator complies with the terms of the Arbitration agreement, the Arbitrator makes an award which on grounds of public policy ought not to be enforced.
(3) Where the Arbitrator has been bribed or corrupted.
(4) Technical misconduct, such as where the arbitrator makes a mistake as to the scope of the authority conferred by the agreement of reference. This however does not mean that every irregularity of procedure amounts to misconduct.
(5) Where the arbitrator or umpire fails to decide all the matters which were referred to him.
(6) Where, by his award, the Arbitrator or Umpire purports to decide matter which have not in fact been included in the agreement or reference. For example: a) where the award contains unauthorized directions to the parties. Or b) where the arbitrator has power to direct what shall be done but his directions affect the interests of 3rd parties. c) where the arbitrator decide as to the parties rights, not under the contract upon which the arbitrator had proceeded, but under another contract.
(7) If the award is ambiguous or is inconsistent, some mistake of fact which mistake must be either admitted must be either admitted or at least clear beyond any reasonable doubt.
(8) Where the umpire or Arbitrator refuses to state a special case for himself or allow an opportunity of applying to the Court for an order directing the statement of a special case.
(9) Where the Arbitrator or umpire delegates any part of his authority, whether to a stranger or to one of the parties, or even to a co-arbitrator.
(10) Where the Arbitrator on Umpire accepts the hospitality offered with the intention of influencing his decision.
(11) Where the Arbitrator or Umpire acquires an interest in the subject-matter of the reference, or 19 is otherwise an interested party.
(12) Where the Arbitrator or Umpire takes a bribe from either party.
(13) Where the Arbitrator or Umpire has breached the rules of natural justice.
(14) If there has been irregularity in the proceedings as, for instance: a) where the Arbitrator failed to give the parties notice of the time and place of meeting; or b) where the agreement required the evidence to be taken orally and the Arbitrator received affidavits. c) where the Arbitrator refused to hear the evidence of a material witness or d) where the examination of witnesses is taken out of the parties hands or e) where the Arbitrator failed to have foreign documents translated; or f) where, the reference being to two or more Arbitrators, they did not act together; or g) where the umpire after hearing evidence from both parties, received further evidence from one without informing or hearing in other or h) where the umpire attended the deliberations of the appeal board reviewing his awards.
(15) If the arbitrator or umpire has failed to act fairly towards both parties, as for e.g. a) by hearing one party but refusing to hear the other; or b) by deciding in default of defence without clear warning; or c) by taking instructions from or talking with one party in the absence of the other; or d) by taking evidence in the absence of one party or both parties; or e) by failing to give a party the opportunity of considering the other party’s evidence; or f) by using knowledge he has acquired in a different capacity in such a way as to influence his decision or the course of the proceedings or g) by making his award without hearing witnesses whom he had promised to hear; or h) by deciding the case on a point not put by the parties.”.
DIAMOND BANK LTD v. UGOCHUKWU (2008) 1 NWLR (Pt. 1067) where the Court held per RHODES-VIVOUR, JCA, (as he then was) that for force majeure to occur, there must be an event which significantly changes the nature of the contractual rights of the parties that it would be unjust to expect the parties to perform those rights such as: (1) Where the subject matter of the contract has been destroyed, or is no longer available. (2) Death or incapacity of a party to a contract. (3) The contract has become illegal to perform as a result of new legislation. (4) A contract can be frustrated on the outbreak of war. (5) Where the commercial purpose of the contract has failed.
⦿ NOTABLE DICTA
There is the need for the Respondent or his counsel, with leave of the Court, to move the objection before the hearing of the substantive appeal. – Ndukwe-Anyanwu, J.C.A. Globe Spinning Mills Nigeria Plc v. Reliance Textile Industries Limited (2017)
Force majeure is a common clause in contracts which provides that one or both parties can cancel a contract or be excused from either part or complete performance of the contract on the occurrence of a certain SPECIFIED EVENT OR EVENTS beyond the parties’ control. Such event(s) may include; war, strike, riot, crime, or an event described by the legal term act of God (hurricane, flood, earthquake, volcanic eruption, etc.), prevents one or both parties from fulfilling their obligations under the contract. – Ndukwe-Anyanwu, J.C.A. Globe Spinning Mills Nigeria Plc v. Reliance Textile Industries Limited (2017)
Force majeure is generally intended to include occurrences beyond the reasonable control of a party, and therefore would not cover: 1. Any result of the negligence or malfeasance of a party, which has a materially adverse effect on the ability of such party to perform its obligations. Any result of the usual and natural consequences of external forces. To illuminate this distinction, take the example of an outdoor public event abruptly called off. If the cause for cancellation is ordinary predictable rain, this is most probably not force majeure. If the cause is a flash flood that damages the venue or makes the event hazardous to attend, then this almost certainly is force majeure. Some causes might be arguable borderline cases; these must be assessed in light of the circumstances. Any circumstances that are specifically contemplated (included) in the contract for example, if the contract for the outdoor event specifically permits or requires cancellation in the event of rain. – Ndukwe-Anyanwu, J.C.A. Globe Spinning Mills Nigeria Plc v. Reliance Textile Industries Limited (2017)
I will just add that there is no event that has occurred which can be termed as force majeure. The reasons given by the Respondent are the usual vicissitudes of the trade in Nigeria. One cannot be doing business in Nigeria and not put into considerations the endemic issue i.e. epileptic electricity, fluctuation of price of diesel and gas. Moreover, diesel and gas may be disrupted by the many occasions of fuel scarcity in the country. It is pertinent to note also that our land borders are very porous and anybody in this business would have known that this is the situation. Can this therefore be said to be force majeure when these situations are with us always. Force majeure is something that is unexpected and unforeseen happening, making nonsense of the real situation envisaged by parties. – Ndukwe-Anyanwu, J.C.A. Globe Spinning Mills Nigeria Plc v. Reliance Textile Industries Limited (2017)