Need for Arbitrator(s) to Confine Decision to the Agreement of Parties
SFacts ometime in 1999, a certain Mr. Danny Bufkin, an American citizen and an expatriate with the Respondent who was seconded to the Appellant through a Service Contract dated 1st November 1995, was abducted by unknown armed men during the course of his duties in Rivers State. Mr. Bufkin was in the custody of his abductors for several days, and was only released upon payment of a ransom by the Respondent. After his release, Mr. Bufkin instituted legal proceedings against the Respondent before a United States District Court on the grounds of negligence. Pursuant to Clause 10 of the Service Contract which provided that the Appellant was to indemnify the Respondent against all liabilities, including Attorney’s fees, arising out of injury to any person including employees of the Appellant, the Respondent requested that the Appellant and its Underwriters (Zurich American Insurance Group) defend the suit and provide indemnification and insurance coverage to the Respondent.
The underwriters, however, refused to provide defence, indemnification and insurance coverage. Consequently, the Respondent and its designated affiliated companies and the Appellant, negotiated a settlement agreement with Mr. Bufkin in the sum of $325,000 (Three Hundred and Twenty Five Thousand Dollars). This agreement was without prejudice to the rights and obligations of parties under the contract. The Appellant paid the sum of $150,000 while the Respondent paid the balance sum of $175,000 to Mr. Bufkin.
Thereafter, relying on the contractual indemnity provisions in the Service Contract, the Respondent demanded from the Appellant a refund of the sum of $175,000 incurred in settling Mr. Bufkin’s claim, as well as the sum of $232,249.66 which was incurred in Attorney’s fees in respect of the suit instituted by Mr. Bufkin. The Appellant failed to settle the amount, relying on the exclusion of liability clause in the contract, which provided that the indemnity will not apply where it is void, unenforceable under an applicable law in effect, or where the loss or injury in question arose from the active negligence or wilful conduct of an Indemnitee and it is not contributed to by any act or omission of the Appellant. Subsequently, a dispute arose further, to which the Respondent filed a Notice of Arbitration referring the dispute to a Sole Arbitrator for resolution. At the conclusion, the Arbitrator awarded to the Respondent the sum of $175,000 incurred in settling Mr. Bufkin’s claim, interest thereon and the costs of the Arbitration. The Arbitrator also held that, under the contract, the Respondent was entitled to payment of Attorney’s fees; however, he refused to award the sum of $232,249.66 claimed by the Respondent as the Attorney’s fees incurred in defending Mr. Bufkin’s suit, on the basis of lack of evidence in proof of its payment.
Dissatisfied, the Respondent filed an Originating Summons at the High Court of Lagos State for an order setting aside that part of the award refusing the claim for the Attorney’s fees. The complaint of the Respondent before the trial Court was that the Arbitrator misconducted himself by going outside the agreed issues before him, raised the issue of proof of payment of Attorney’s fees suo motu without inviting parties to address him on the issue, and relied on grounds not canvassed by any of the parties in refusing the Respondent’s claim for Attorney’s fees. The trial Court found that the Arbitrator indeed, misconducted himself and remitted the matter to the Arbitrator for a reconsideration of the part of the award complained about. Dissatisfied with this decision, the Appellant appealed to the Court of Appeal which also affirmed the decision of the trial Court. Still dissatisfied, the Appellant filed a further appeal before the Supreme Court.
Issue for Determination The Appellant distilled a sole issue for determination, which was adopted by the Court, as follows:
Was the Court of Appeal right to affirm the decision of the trial Court to the effect that it was misconduct on the part of the Arbitrator to have raised and determined suo motu, the question of who paid the Attorney’s fees in defence of Mr. Bufkin’s claims in the United States of America, and if not, were the learned Justices of the Court of Appeal not in error to have remitted part of the award to the Arbitrator for reconsideration.
Arguments Counsel for the Appellant contended that the parties had joined issues on the Respondent’s assertion that it incurred reasonable Attorney’s fees in defending Mr. Bufkin’s claim and the resultant question was, did the Respondent substantially prove the assertion? He argued that the Arbitrator did not raise any issue suo motu without reference to the parties, so as to justify the decision remitting the award to the Arbitrator. Arguing the case of the Respondent, Counsel submitted that the decision of the lower Court was unassailable, as the Respondent was able to satisfy the Court that the issue of proof of payment was outside the scope of issues placed before the Arbitrator, and that the Arbitrator raised the issue suo motu without putting the parties on notice. By way of Reply on Points of Law, Counsel for the Appellant referred the Court to the relief sought by the Respondent, which was for the Appellant to pay the amount it claimed to have incurred as legal fees. He argued that the implication is that the Arbitrator did not go outside the case in his finding on the reimbursement of Attorney’s fees.
Court’s Rationale and Judgement Deciding the narrow issue of whether the Arbitrator went outside his mandate in raising the issue of who paid the Attorney’s fees, the Courts below agreed that the issue was raised suo motu by the Arbitrator, because same was neither pleaded nor raised as an issue for determination or argued in the brief of argument. Guided by the above facts, the Supreme Court examined what a Court or Tribunal or an Arbitrator as in this case, should do when he seeks to raise an issue suo motu. The case of KRAUS THOMPSON ORGANISATION LTD. v UNIVERSITY OF CALABAR (2004) 9 NWLR (Pt. 879) 631 was called in aid, where it was held that - “when an issue is not placed before the Court, such Court has no business whatsoever to deal with it, as a decision of a Court of law must not be founded on any ground in respect of which it has neither received argument from or on behalf of the parties before it, nor even raised by or for the parties or either of them.”
Relying on its decision in BAKER MARINE LTD. v CHEVRON NIGERIA LTD (2000) 12 NWLR (Pt. 681) 393 at 406, the Court held that there is a need for Arbitrators to act within the agreement of the parties, and when Arbitrator veers off the track, the necessity of the Court as was done in the case in hand, is to right the wrong. By the provisions of Section 29(2) and 30 of the Arbitration and Conciliation Act, Cap A18 Laws of the Federation of Nigeria, 2004, failure of an Arbitrator to comply with the terms of an arbitration agreement amounts to misconduct on his part, and the consequence is that, the Court has powers to set aside the award and remit or return the award published to the Arbitrator for the error to be corrected either on the existing facts or further facts.
The Court reasoned that the appeal raised the issue of fair hearing under Section 36(1) of the Constitution of the Federal Republic of Nigeria, 1999 and the need to uphold the principle that a judicial body ought at all times, to decide upon points only canvassed before it and if it has to raise any point suo motu, there is a mandatory injunction which impels that judicial body to give a hearing to the parties, especially the one who would be adversely affected, such as the Respondent in this instance. Failure to adhere to this time tested guiding principle rendered the act of the Arbitrator a misconduct necessitating and justifying the Court setting aside that part of the award tainted with the anomaly.
Based on the foregoing, the Supreme Court found no basis for interfering with the concurrent findings of fact of the trial Court and Court of Appeal.
Appeal was dismissed with costs N250,000.00 awarded in favour of the Respondent.
Representation: Adewale Atake Esq., with Chidiebere Ejiofor Esq. and Solomon Babajide Esq. for the Appellant.
Adedoyin Rhodes-Vivour (Mrs.) with Anthony Onwaeze Esq. for the Respondent. Reported by Optimum Publishers Limited (Publishers of Nigerian Monthly Law Reports (NMLR))