The Doctrine of Substantial Compliance
“..... SUBSTANTIAL COMPLIANCE WHICH TRANSLATES TO ACTUAL COMPLIANCE, IN RESPECT TO THE SUBSTANCE ESSENTIAL TO EVERY REASONABLE OBJECTIVE OF THE STATUTE. THE DOCTRINE OF SUBSTANTIAL COMPLIANCE, PERMITS THE COURT TO OVERLOOK TECHNICAL FAILURE WHICH DOES NOT AMOUNT TO, OR CONSTITUTE DEVIATION FROM THE INTENDMENT OF THE STATUTE”
Facts
The Appellant, as Landlord, entered into a tenancy agreement with the Respondent, in respect of a property in Ogudu GRA, Lagos. The tenancy agreement contained an Arbitration Clause charging the parties to resort to arbitration, in the event of dispute arising from the agreement. Consequent upon this, the Appellant served a Notice of Arbitration on the Respondent, in line with the agreement. In the said Notice, the Appellant stated that he had applied to the President of the Chartered Institute of Arbitrators, London, Nigeria Branch, to appoint an Arbitrator to resolve the dispute which was detailed in the attachment to the Notice. At the end of the arbitral proceedings, an award was rendered in favour of the Appellant, which he sought to enforce in Suit No. M/ 225/2007. While the suit was pending, the Respondent sought to set aside the Arbitral Award by an Origination Motion, in Suit No. M/323/07. The consolidated suits, Suit No. M/225/2007, filed by the Appellant was struck out, while the trial court refused the prayer to set aside the Arbitral Award in Suit No. M/323/2007.
The Respondent appealed to the Court of Appeal, who unanimously allowed the appeal, and set aside the arbitral proceedings. The Appellant further appealed to the Supreme Court.
Issues for Determination
The court considered the following issues, in resolving the appeal:
1. Whether the lower court was right, when it failed to consider the unchallenged evidence on record and the provisions of Section 33 of the Arbitration and Conciliation Act, when it found the Notice of Arbitration invalid.
2. Whether the lower court was right to have given the arbitration agreement a literal interpretation, which led to manifest absurdity.
3. Whether the Court of Appeal was right when it held that, two parties to the arbitration agreement must have a say in the appointment of an Arbitrator, without recourse to the express agreement between the Appellant and the Respondent conferring the power to appoint an Arbitrator on a third party.
4. Whether the Arbitrator misconducted herself by delegating her duties to the law firm of Sola Ajijola & Co., and whether the Court of Appeal has jurisdiction to set aside the Arbitral Award.
Arguments
Submitting on the first issue, counsel for the Appellant reasoned that, by the provision of Section 33 of the Arbitration and Conciliation Act, 2004 (ACA) and Article 30 of the Arbitration Rules, the Respondent waived his right to any non- compliance with valid Notice of Arbitration and sundry issues, when he failed to object timeously. He relied on ODUA INVESTMENT CO. LTD v JOSEPH TAIWO TALABI (1997) 10 NWLR (PT. 523) 6. He argued further that, notwithstanding the above, the Court of Appeal was wrong to hold that there was noncompliance with Section 3(3) of the Arbitration Rules, since the Rules is not exhaustive, and may allow for different inferences depending on the circumstances. In response, counsel argued for the Respondent that, by the use of the word “shall” in Article 3 of the Arbitration Rules, the Arbitration Notice given by the Appellant, which does not comply strictly with the Rules, falls short of the mandatory requirements to ensure its validity – C.N. ONUSELOGU ENT. LTD. v AFRIBANK (NIG.) LTD (2005) 12 NWLR (PT. 940) 587. He submitted also that, there was no referral to arbitration in the circumstance, as the condition precedent was not fulfilled by the Appellant and that the Appellant did not waive his right to object to the arbitration proceedings as held in KANO STATE URBAN DEVELOPMENT BOARD v FANZ CONSTRUCTION CO. LTD (1990) 6 SC 103.
In his submission on the second issue, counsel posited that, the strict interpretation of Clause 3(c) of the Tenancy Agreement in relation to appointment of an Arbitrator, worked out an absurdity. Counsel enjoined the court to look at the intention behind the words adopted and other evidence from the transaction, relying on the decision in ADETOUN OLADEJI v NB PLC (2007)
LPELR-160. Differing on the above position, counsel for the Appellant opined that, terms of an agreement must be valid to be enforced. He reasoned that by Clause 3(c) of the Tenancy Agreement, the body stated to be appointed as Arbitrator is non-existent, and parties are bound by their contract.
On the third issue, counsel contended that, by Clause 3(c) of the Tenancy Agreement and Section 7 of the ACA, the parties specified the appointment of a sole Arbitrator by an appointing authority, and that the letter written by the Appellant was in compliance with the Arbitration Agreement. He submitted that, the agreement did not contemplate that parties must be involved in the appointment of an Arbitrator. He stated further that, lack of notice to the Respondent to appoint the Arbitrator, is not sufficient to set aside the Arbitral Award; better still, the Respondent waived his right thereto. More so, the sole Arbitrator notified the Respondent of her appointment by the letter dated 9th January, 2006. The Respondent, in this regard, maintained that he was not given any notice of the purported appointment of Mrs. Olusola Adegbonmire, contrary to the guiding principle that parties choose their Judge, and in compliance with the rules of natural justice.
Arguing the last combined issue, counsel submitted that, it is perverse and technical for the Court of Appeal to have held that the Arbitrator misconducted herself by delegating her duty to another law firm, merely because she changed her personal letterhead to her official letterhead. With regard to the other leg of the issue, he submitted that, by Sections 29 and 30 of the ACA, there was no proof by the Respondent to warrant the setting aside of the Arbitral Award. Countering these submissions, counsel argued for the Respondent that, he did not appoint or ratify the recommendation of Mrs. Olusola
Adegbomire as an Arbitrator, and that her misconduct ranged from falsehood to misrepresentation, fraud, bias and partiality, contrary to Section 9 of the ACA. He posited that, the taking over of the proceedings by the law firm of Sola Ajibola & Co., amounted to unlawful delegation of her authority, contrary to Section 30(1) of the ACA.
Court’s Judgement and Rationale
Deciding the first issue which relates to the validity of the Notice of Arbitration served on the Respondent by the Appellant, the Supreme Court highlighted the provisions of Article 3 of the Arbitration Rules on the requirements for initiating an arbitration proceedings. Relying on the decision in UGWUANYI v NICON INSURANCE PLC (2013) LPELR-20092(SC),
their Lordships reckoned that Notices are recognised procedural provisions, which give the Defendant breathing time to determine whether to make reparation to the Plaintiff. The court regarded the Notice of Arbitration dated 5th August, 2005 served on the Respondent, as sufficient for satisfying the condition precedent stipulated, and that the Respondent who received the said Notice, cannot feign ignorance of the general nature of the claim and the amount claimed, especially where the Appellant attached every document and information necessary for use of the Respondent. Assuming that the Notice was not in full compliance of the Rules, there was substantial compliance which translates to actual compliance, in respect to the substance essential to every reasonable objective of the Statute. The doctrine of substantial compliance, permits the court to overlook technical failure which does not amount to, or constitute deviation from the intendment of the Statute – BUHARI v INEC & ORS. (2008) LPELR814(SC). The Notice issued by the Appellant was received and responded to by the Respondent, without challenging the initiation process. Service of Arbitration Notice, is akin to service of Pre-action Notice, the right to service of which can be waived. It is not correct law to say that, a party cannot waive his right in all matters affecting jurisdiction of court – F.F. FARMS NIG. LTD v NNPC (2009) 12
NWLR (Pt. 1155) 387 at 401. Rather, it is ideal to consider each case on its merits, and not as a blanket principle of law to be applied across the board to all cases relating to jurisdiction. Going by the provisions of Section 33 of the ACA, the Respondent who failed to challenge the non-compliance with the provisions, can be said to have waived his right to complain about such irregularity subsequently.
On the second issue, the court held that where the intention of the parties to a contract are clearly expressed in a document, the court cannot go outside the document in search of other documents not forming part of the intention of the parties – NNEJI v ZAKHEM CON. (NIG.)
LTD (2006) LPELR-2059(SC). Where however, the terms or expression are absurd or ambiguous, the intention of the parties is read into the contract. The misnomer in the provision of the agreement, was the reference to London instead of “UK”. The reference to – Chartered Institute of Arbitrators, London, Nigeria Chapter – cannot be inferred that the body is non-existent. Further, the Respondent, who was a party to the agreement and appended his signature thereto, is bound by same, inclusive of the errors and mistakes condoned and waived. Parties are presumed to have intended the contents of the document, they subscribed to.
Regarding the third issue, it was decided that the court cannot make contract for the parties. The parties herein, agreed to the appointment of a sole arbitrator. The Appellant, recommended Mrs. Olusola Adegbonmire. Her appointment was communicated to the Respondent, who did not challenge the appointment. Sections 8 and 9 of the Act envisage the appointment of an Arbitrator and challenge procedure, where there may be bias or partiality. It follows that, the Respondent who submitted himself to the arbitration, cannot be heard to resile from the decision on the pretext of challenging the appointment of a sole Arbitrator he subscribed to.
Deciding the last issue as it relates to the complaint of misconduct by the Arbitrator as alleged by the Respondent, the Apex Court reasoned that the silence of the Respondent and his subsequent participation in the proceedings serve as estoppel and waiver against him, as silence in the situation leads to an irrefutable presumption of admission by conduct or representation – JOE IGA & CO. v CHIEF EZEKIEL AMKURI & 4 ORS (1976) 11 SC 1. Further, what amounts to misconduct by an Arbitrator, was highlighted in the case of
TAYLOR WOODROW (NIG) LTD v SUDDENTSCHE ETNA-WERIKI GMBH (1993) 4 NWLR (PT. 286) 127 AT 142-144. The Respondent in this case, failed to situate his alleged misconduct by the Arbitrator, within the instances outlined in the above decision. Appeal Allowed.
Representation
Dr. Charles D. Mekwunye, Esq. for the Appellant
Hizogie Esezobor, Esq. for the Respondent.
Reported by Optimum Publishers Limited