Motokov. V. Auto Garage Ltd. and Others Civ. Case 46-D-66; 15/9/69; Georges, C. J.

Motokov. V. Auto Garage Ltd. and Others Civ. Case 46-D-66; 15/9/69; Georges, C. J.

The plaintiff sued the defendants for the sums due under Bills of Exchange drawn by the plaintiff on the first defendant and accepted by it. The second and third defendants had guaranteed the bills in consideration of the plaintiff’s supplying motor vehicles to the first defendant. The defence alleged that the first defendant had been induced to enter into the contract because of some fraudulent is representations made by the plaintiff, and by reason thereof the former had suffered damages. In a counter-claim a sum of Shs. 225,670/- with interest was claimed as damages. The plaintiff filed a summons asking for further and better particulars of the written statement of defence, and in January 1967 obtained an order therefore. Two years later, in February 1969, the plaintiff applied to have a counterclaim by the defence stayed o the ground that the issues raised by the counterclaim ought to be referred to arbitration as stipulated in the contract. The arbitration clause red; as follows: arbitration clause read: “All disputes arising out of this contract will be settled amicably. In default of such settlement, the said disputes will be finally settled under the Rules of the Court of Arbitration of the Chamber of Commerce of Czechoslavakia by one/three arbitrator/arbitrators appointed in accordance with these Rules. The parties to the contract undertake at the same time to execute, without delay, the arbitrator’s award.” The defence objected to the grant of a stay on the grounds (a) that the arbitration clause was void against public policy as it ousted the jurisdiction of the court; and (b) that within the meaning of section 6 of the Arbitration Ordinance Cap. 15 the plaintiff had taken a “step in the proceedings”, and was therefore debarred from asking for a stay. .

            Held: (1) Even if there had been a submission to a foreign arbitrator that could not of itself constitute an ouster of the jurisdiction of the Court. Consequently the clause under consideration was perfectly valid. (2) Any application to a court for an order in respect of the proceedings is a step in the proceedings” within the meaning of section 6 of the Arbitration Ordinance Cap. 15. However, the plaintiff had taken the “step” in relation to the defence, and therefore was not barred from asking for a stay in relation to the counterclaim. (3) The plaintiff had not repudiated the contract by not suing under it because he was the holder of Bills of exchange in respect of which he could sue as well, and consequently he was entitled to plead arbitration clause. (4) “One matter remains for discussion. Section 6 gives the Court the power to grant a stay if satisfied that there is no sufficient reason why the matter should not be referred in accordance with the submission. Mr. Lakha argues that this places the onus on therespondent – that prima facie once the conditions earlier specified are shown to exist it is up to the respondent to show why the stay should not be granted. He urges that the affidavit filed by the respondent discloses no such ground and that accordingly he should have his stay. I do not think the Court is limited strictly to the points set out in the respondent’s affidavit. The proceedings in their entirety are before the court and perusing them, the court is to decide whether or no it is satisfied that the power should not be exercised. The plaintiff has chosen to sue in this Court instead of pursuing arbitration under the agreement which was equally open to him. The defence raises issues of misrepresentation and breach of warranty which form the foundation of the counterclaim. If a stay is not granted there is a substantial risk that two tribunals might reach conflicting conclusions on the facts. The Courts here may hold that the defence of breach of warranty and misrepresentation were established and reject or reduce the plaintiff’s claim while the arbitrators appointed to deal with the matters raised in the counterclaim may hold that misrepresentation and breach of warranty had not been established. The possibility of conflicting decision of fact being reached by different tribunals is a legitimate factor to be taken into consideration in deciding whether a stay should be granted or not. The defences and the counterclaim are so inextricably mixed that it is obviously more convenient to have both of them decided together in one set of proceedings in a forum selected by the plaintiff despite the availability of arbitration. (5) “When there is added to this the long delay of almost two years in making this application I am satisfied that even if the plaintiff is ready and willing to have the matters raised in the counterclaim decided by arbitration a stay should be granted in this case.”