CONSTRUCTION ENGINEERS AND BUILDERS LTD v SUGAR DEVELOPMENT CORPORATION 1983 TLR 13 (CA)

CONSTRUCTION ENGINEERS AND BUILDERS LTD v SUGAR DEVELOPMENT CORPORATION 1983 TLR 13 (CA)

Court Court of Appeal of Tanzania - Dar Es Salaam

Judge Mwakasendo JJA, Makame JJA and Kisanga JJA

28 November 1983

CIVIL APPEAL 23 OF 1983

Flynote

Civil Practice and Procedure-Stay of suit-Whether suit may be stayed on application

of G defendant for matter to be dealt with by Arbitrator- S.6 Arbitration Ordinance,

Cap. 15.

-Headnote

The appellant, Contractor, entered into a contract with the respondent under which

the H appellant was to undertake the construction of "Sukari House" for the

respondent. The construction was to be completed by 3rd January, 1983, and the

respondent was empowered under the contract in certain events to terminate the

contract, take I possession of the works and complete the works by employing

1983 TLR p14

and paying other people to do so. The contract contained an arbitration clause. A

On 7th June, 1982, the respondent issued a notice to the appellant for "failure to

proceed regularly and diligently with the works" and that if the default continued for

another 14 days from the date of receipt of the notice the respondent would be at the

B option of terminating the appellant's employment as a contractor without further

notice.

The employment was terminated by a letter from the respondent to the appellant

dated 4th February, 1983. The appellant then filed a suit in the High Court raising

among other C issues, the following issues: (i) That the respondent could not

terminate the contract in 1983, having stated in his first notice that he would have

terminated it after the expiry of the 14 days if there was a continued breach. Not

doing so raised a presumption that there was no breach and hence a fresh notice was

necessary. (ii) That the respondent, D by waiting for so long after issuing the 1982

notice, had waived his right to terminate the contract and had indeed issued further

instructions to the appellant. (iii) That the appellant had complied with the notice of

1982. (iv) That the termination was E unreasonable and vexatious and (v) the

termination of the contract was illegal and invalid.

On being served with a copy of the plaint, the respondent immediately made an

appearance before the High Court and applied for a stay of the actions in terms of s. 6

of the Arbitration Ordinance. This application was granted. On appeal against the

order F of stay, the appellant argued that the learned High Court Judge wrongly

exercised his discretion to order a stay because the differences between the parties

were not within the scope of the arbitration clause and that the dispute raised

questions of law only which were not within the competence of an arbitrator. G

Held: (i)Where proceedings are instituted by one of the parties to a contract

containing an arbitration clause and the other party, acting pursuant to the arbitration

clause, applies for a stay of proceedings, the court has to decide the precise nature of

the dispute and H whether the dispute falls within the terms of the arbitration

clause;

(ii) where it is clear that the parties to a contract have agreed to submit all

their disputes or differences arising "under" the contract to an arbitrator, the dispute

must go to arbitration unless there is good reason to justify the court to override the

agreement of I the parties.

1983 TLR p15

Case Information

Appeal dismissed A

Cases referred to:

1. Hounslow, L.B.C.v Twickenham Developments [1970] 3 W.L.R. 538.

2. Re Carlisle; Clegg v Clegg [1910] 1 Ch.495

3. Crowe v Crossley [1912]108 L.T.11 B

4. Barnes v Young [1899] 1 Ch.414

5. Green v Howell [1910]1 Ch.495

6. Willesford v Watson 28 L.T. Rep. 428

7. Metropolitan Tunnel etc. Ltd v London Electric Railway [1926] Ch.371

8. Heyman v Darwins Ltd. [1942] A.C. 356 C

M.A. Lakha for the appellant,

Banturaki for the respondent.

[zJDz]Judgment

Mwakasendo, J.A. delivered the considered judgment of the court: The question that

D has to be decided by the Court in this appeal is whether the suit filed in the High

Court by the appellants against the respondents should, on the application of the

latter, be stayed pursuant to the provisions of section 6 of the Arbitration Ordinance,

Cap. 15 of E the Laws of Tanganyika, so that the matter in dispute may be dealt with

by an arbitrator appointed in accordance with clause 36(1) of the contract entered

into by the parties.

To answer the question posed we start with an examination of the dispute that has

arisen between the parties. The appellant, as one can see from the plaint is a

Construction or F Building Engineers (hereinafter referred to as "the Contractor"),

and the respondent is a parastatal organization (hereinafter referred to as "the

Employer"). By an Agreement made between them on 19th September, 1980, the

employer employed the contractor to carry out the work of erecting "Sukari House",

the work to be completed on 3rd G January, 1983. Clause 25 of the Contract

empowered the Employer in certain events to terminate the contract, take possession

of the works and complete the works by employing and paying other people to do so.

Clause 26 stipulated the circumstances in which the contractor might terminate the

contract. The contract also contained an H arbitration clause-clause 36. I

1983 TLR p16

MWAKASENDO JA

According to the Statement of claim in the plaint, the Employer on 7 June, 1982,

issued A a notice addressed to the Contractor in terms of Clause 25(1)(b) of the

conditions of the contract. The notice, entitled "Notice of Determination by

Employer" reads:

In accordance with Clause 25(1)(b) of the Agreement and Schedule of

Conditions of the B Building Contract between the Sugar Development Corporation

and yourselves, and the Agreement dated 19th September, 1980, we hereby give

notice to you that you are in default by reason of: "Your failure to proceed regularly

and diligently with the works". C

If this default continues for the ensuing fourteen days from the date of receipt

of this notice, the Employer may determine your employment as contractor without

serving further notice. D

It is then alleged in the plaint that on 4th February, 1983 the Employer wrote a letter

to the Contractor notifying him that he was terminating the contract and taking

possession of the works pursuant to the provisions of clause 25 of the Contract.

Following this notice the Contractor filed a suit in the High Court raising a number of

issues of dispute. E These issues are set out in paragraphs 6 to 10 of the plaint. They

read as follows:

6. By notice dated 4th February, 1983, the defendant has purported to

terminate the contract F acting under the above conditions and the notice of the 7th

June, 1982 annexed here to and marked "B" is copy of the said notice of the fourth

February, 1983 of the plaintiff, states that the defendant is not entitled to terminate

the contract aforesaid. In February, 1983 acting on the notice of 7th June, 1982 as

under condition 25 (1) (b) the defendant was obliged to terminate G the contract

within 14 days of the date of the said notice and that if the defendant found any

breach by the plaintiff that would entitle the defendant to a termination in February,

1983, a clear fresh notice was necessary and a precondition under the said condition

before H termination.

7. Moreover the plaintiff states that the defendant has waived the said notice

of the 8th June, 1982 in that after the issues of the said notice and the expiry of the

days, the defendant has I acknowledged and accepted the plaintiff as continuing in

1983 TLR p17

MWAKASENDO JA

contract for the said work with the defendant and has issued further

instructions to the plaintiff, A has obtained further work from the plaintiff and made

various payments to the defendant.

8. Further and in the alternative, the plaintiff states that the plaintiff has

complied with the requisitions in the notice of the minutes of the site meetings. B

9. The plaintiff will also contend that the purported termination is

unreasonable and vexatious as the defendant unreasonable (sic.) fails to take into

account the prevailing conditions in Tanzania. Defendant is actuated by a desire to

replace the plaintiff with a contractor of (sic.) the C choice.

10. In the premises the plaintiff contends that the purported termination of

the contract by the defendant is illegal and inoperative. D

On being served with a copy of the plaint, the Employer immediately made an

appearance before the High Court and applied for the action to be stayed in terms of

E section 6 of the Arbitration Ordinance, Cap. 15. Section 6 reads:

6. Where any party to a submission to which this Part applies, or any person

claiming under him, commences any legal proceedings against any other party to such

legal proceedings F may, at any time after appearance, and before filing a written

statement, or taking any other steps in the proceedings, apply to the court to stay the

proceedings;and the Court, if satisfied that there is no sufficient reason why the

matter should not be referred in accordance with the submission, and that the

applicant was, at the time when the proceedings were commenced, G and still

remains, ready and willing to do all things necessary to the proper conduct of the

arbitration, may make an order staying the proceedings.

Where proceedings are instituted by one of the parties to a contract containing an H

arbitration clause, as was the case here, and the other party, acting pursuant to the

arbitration clause, applies to the High Court for a stay of proceedings, the first thing

to be decided is the precise nature of the dispute which has arisen and the next

question is I whether the dispute is one within the terms of the

1983 TLR p18

MWAKASENDO JA

arbitration clause. In the instant case the matters in dispute are set out in paragraphs 6

to A 10 of the plaint-supra. But to answer the question whether the dispute in the

case falls within the arbitration clause, one has to construe the arbitration clause. The

arbitration clause - clause 36 contained in the contract between the parties, is a

standard form of B clause which is to be found in most building contracts based on

the Royal Institute of British Architects (R.I.B.A.) form of contract. It is framed in the

widest terms possible and embraces "any dispute or difference between the Employer

and the Contractor.... as C to the construction of the contract or as to any matter or

thing of whatever nature arising thereunder or in connection therewith... or the

rights under clause 25.... then such dispute or difference shall be and is hereby

referred to the arbitration and final decision of a person to be agreed between the

parties...."

Counsel for the parties agree that the arbitration clause in this case covers all the

issues in D dispute because on a proper construction of the clause the dispute or

difference relates to matters arising "under" or "in connection with" the contract

and/or the rights and liabilities of the parties under clause 25. That, we think, is a

perfectly correct construction of the arbitration clause - clause 36 of the Conditions.

What, however, the E advocates of the parties are not agreed upon is the question

whether in the circumstances of this case the learned High Court Judge was right in

ordering a stay of proceedings in the exercise of this discretion under section 6 of the

Arbitration Ordinance. Mr. Lakha, learned counsel for the Contractor, has submitted

that the learned High court Judge acted on a wrong principle in ordering a stay in the

present F case. He has contended that in view of the nature of the dispute which, he

submits, involves only questions of law, and of the character of the submission, this

was a case in which the High Court, if it considered that the arbitrator had

jurisdiction, would exercise G its discretion and refuse to stay the proceedings. On

the other hand, Mr. Banturaki, learned counsel for the Employer, has countered Mr.

Lakha's arguments by submitting that the matters in dispute and difference between

the parties arose "under" the contract H and were within the scope of the arbitration

clause contained in the contract and were, therefore, fit and proper matters to be

referred to and decided by an arbitrator appointed under the arbitration clause. He

submitted further that there was no sufficient reason why the dispute should not be

so referred and decided.

To decide if Mr. Lakha's submissions are correct and should be upheld, we have to I

examine the dispute more closely.

1983 TLR p19

MWAKASENDO JA

The first two matters in dispute raised in paragraph 6 of the plaint relate to the

question A of notice. The Contractor in this paragraph is saying that the two notices

issued by the Employer, that is, notices dated 7th June, 1982 and 4th February, 1983,

were invalid and did not entitle the Employer to terminate the contact. Further, the

Contractor has contended that he was entitled to notice specifically pointing out his

defaults at least B fourteen clear days before being served with the notice dated 4th

February, 1983. He has said that such a notice, which he calls, "a clear fresh notice"

was "necessary and precondition under the said condition before termination by the

defendant".With respect, there is clearly a misapprehension on the part of the

Contractor as to what the effect of a C notice under Clause 25 of the conditions

really is. Its effect is not, as the Contractor appears to think, to terminate the contract.

The effect of a notice under this type of a building contract was well described by

MEGARRY, J. in the case of Hounslow D L.B.C. v Twickenham Developments

[1970] 3 W.LR. 538 at p. 363 in these words:

In one sense it is a mere warning, it does not determine the contract, and it

gives the E Contractor an opportunity of mending his ways. On the other hand, the

notice has a continuing effect, for even if the Contractor puts matters right within

fourteen days the building owner may without any further architect's notice give

notice determating the Contractor's employment if the contactor "shall at any time

thereafter repeat such default (whether previously repeated or F not)". Even so, the

notice determines nothing, the notice loads the pistol, but unless something else

occurs, the pistol cannot be discharged and the contract remains a foot.

We think it is clear from what we have said on this matter, that the issues raised by

the G Contractor in paragraph 6 of the plaint are not, as contended by the

Contractor, purely questions of law. No doubt the Contractor's contentions give rise

to interesting questions of law, but as it seems to us, these questions cannot be

answered as questions of law, H without ascertaining all the surrounding facts, some

of which may be technical and others may not. Thus, to answer the two questions

raised by the contractor with regard to the validity of the Employer's notices, one has

to consider not only the factual foundation for the Employer's notices but also

construe the contract. I

1983 TLR p20

MWAKASENDO JA

Mr. Lakha in opposing a stay of proceedings in this case, cited a number of English A

reported cases in support of his submissions. We will refer to only two of these cases

here. One of the cases cited by Mr. Lakha to which we would like to refer is the case

of Re Carlisle; Clegg v Clegg [1910] 1 Ch 495. FARWELL, J. in Crowe v Crossley B

(1912) 108 L.T. 11 at p.15 commented on the decision in Re Carlisle as follows:

Both my brothers in this court think that the discretion was properly

exercised, and I am unable to say that there is a sufficient reason why the matters

should not be referred to arbitration. C The mere fact that there must be questions of

law is not sufficient. Certainly Willes, J. in Seligmann v Le Boutilier (L. Rep. 1CP.

681) said so, and North, J. in a case we have been referred of Re Carlisle; Clegg v

Clegg (62 L.T. Rep. 821; 44 Ch. Div 200) put it on the ground D which is perfectly

intelligible - that there was only one question in the action, and that was a question as

to the construction of the deed of partnership, as I think it was there, and there were

no facts in dispute. He said it would be idle to go to arbitration when the first and

only E thing would be to state a case for the opinion of the court. That is a perfectly

intelligible principle which I should be very glad and ready to follow at any moment.

The other case cited by Mr. Lakha is the case of Barnes v Young [1898] 1 Ch. 414. F

This was a case of a partnership in which the article provided that a partner might be

expelled for breach of certain acts therein specified, and that if any question should

arise whether a case had happened to authorize the exercise of this power, such

question should be referred to arbitration. The defendants served a notice on the

plaintiff to determine the partnership on the ground that he had committed a breach

within the G expulsion clause, but gave no details of the particular act complained

of. The plaintiff thereupon brought an action to restrain the defendants from acting

on this notice; the defendants moved to stay proceedings and refer all matters in

dispute to arbitration. The H Court held that the preliminary question whether or

not the notice of expulsion was valid was one more suitable for decision by the court

than by an arbitrator, and that as there was a suggestion of a fraudulent exercise of the

power of expulsion, the court in the exercise of its discretion, ought not to stay

proceedings and enforce a reference. The I decision in Barnes v. Young was

approved by the Court of Appeal in Green v.

1983 TLR p21

MWAKASENDO JA

Howel [1910] 1 Ch. 495, another partnership case cited by Mr. Lakha in argument. A

A common feature of the two cases: Re Carlisle and Barnes v Young is that in both

cases the only issue in dispute was the construction of partnership deed, there being

no facts in dispute. This is certainly not the case with the two matters in dispute as

raised by B the Contractor in paragraph 6 of the plaint.

The third matter of dispute between the Contractor and the Employer is the question

of waiver - see paragraph 7 of the plaint. In this connection we think it is pertinent to

observe that in view of what Megarry J. said in Hounslow's case with regard to the C

effect of a notice under condition 25 of the Building contract, the Contractor's

contention on the question of waiver appears to be unsound.

The fourth matter of dispute, which is put as an alternative issue to the other three

issues, is set out in paragraph 8 of the plaint and concerns a claim by the Contractor

that he "complied with the requisitions in the notice of the 7th June, 1982 as is

manifest from the D minutes of the site meetings" This question, as we understand

it, is largely a matter of disputed fact which will have to be resolved against the

general terms of the contract. As the Contractor seems to be asserting in paragraph 8

of the plaint that from 7th June, 1982 he had been carrying out the work of

construction "regularly" and "diligently", it E seems to us that in order to decide

whether the Contractor's claim is true, one will have to examine the factual basis of

this claim and so determine the meaning of the words "regularly" and "diligently".

This exercise will, as it seems to us, require evidence to be F called from persons who

are familiar with the building trade. MEGARRY, J. in Hounslow's case points to the

difficulties that are involved in construing the two words: "regularly" and "diligently".

He discusses this matter at p. 571 as follows: G

These are elusive words, on which the dictionaries help little. The word

convey a sense of activity, of orderly progress, and of industry and perseverance: but

such language provides little help on the question of how much activity, progress and

so on is to be expected. They are words used in a standard form of building contract in

relation to functions to be discharged by H the architect and in those circumstances

it may be that there is evidence that could be given, whether of usage among

architects, builders and building owners or otherwise, that could be helpful in

construing the words. At present all I can say is I

1983 TLR p22

MWAKASENDO JA

that I remain somewhat uncertain as to the concept enshrined in these words.

A

The last issue in dispute is set out in paragraph 9 of the plaint. The Contractor claims

in that paragraph that the Employer, in terminating the contract, acted unreasonably

and B vexatiously. Whether the Employer is guilty of what he is accused we think, is

a question of fact.

These then are matters in dispute between the parties. We do not think that after

what we have said on these matters, it can now be seriously contended that the

dispute C between the parties is one of pure law. That the dispute involves an

investigation and determination of the background facts leading to the alleged

termination of the contract was, we think, made clear in argument by both counsel.

Much as we are attracted by D Lakha's forceful argument, there is no way we can

ignore the law which governs the question which we have to decide. The law on the

subject-matter of dispute is clear and well established. We will refer here to only a

few of the leading cases which, though not binding on us, lay down clear and sound

principles on the subject-matter with which we are concerned.

As an answer to Mr Lakha's main argument that the matters in dispute in this case are

E not fit and proper to go to arbitration, one is reminded of a famous passage from

the judgment of LORD SELBOURNE in the case of Willesford v Watson, 28 L.T. Rep.

428; L. Rep. 8 Ch. App. 473 at 497 which was cited with approval by COZENS F -

HARDY, M.R., in Crowe v Crossley (1912) 108 L.T. 11 at 13, as follows:

Then we are told that this is an arbitrary tribunal final and without appeal,

and so forth, and that there are not fit questions to go before the arbitrator. But I

think that the Legislature and the Act G of Parliament under which the Court is

now asked to act, have given the answer to that argument. If parties choose to

determine for themselves that they will have a domestic forum instead of resorting to

the ordinary courts, then since the Act of Parliament was passed a H prima facie

duty is cast upon the courts to act upon such an agreement.

After quoting the above passage COZENS-HARDY, M.R., discussed at p.14 the

question before him in these words: I

1983 TLR p23

MWAKASENDO JA

It is said - and said very forcibly by Mr. Clavell Salvell Salter and his junior -

that it is apparent A that the questions which have arisen....are really questions of

law. And it is said that there cannot be anything more absurd than to refer to a civil

engineer difficult questions arising under the law of contract as interpreted and

enforced by courts of law in this country. There is B no doubt considerable force in

that. But the Arbitration Act 1889 itself seems to me to furnish an answer to that. It is

quite clear that Act contemplates that the arbitrator shall deal or may deal with

questions of law.

He then went on to discuss the principles which guide the court in the exercise of its

C discretion to interfere with the agreement of the parties to submit their differences

or disputes arising under a contract to arbitration. He dealt with the matter thus: D

I therefore do not think that it can be enough to say as questions of law of a

serious kind will arise here the court ought not in the exercise of its discretion to

interfere. This is not a case in E which questions of law can be kept apart from the

facts of the case. If, for instance, it had been merely a question of law arising upon the

construction of certain words in a lease or a contract of sale, or what not, I can quite

conceive that the court might say - as the court has done in one or two cases - that

there is only one question of law here, and that it is idle to refer that to arbitration,

because the first thing the arbitrator would undoubtedly do would be to refer F that

to the court for the decision of the court as a question of law.

It may be noted that in Crowe v Crossley the Court of Appeal granted a stay

notwithstanding that the dispute involved difficult questions in the law of contract,

which G the arbitrator would be unable to decide, as this was a case in which "it

would be as hard for lawyers to understand the machine as for an engineer to

understand the law".

In Metropolitan Tunnel etc. Ltd. v London Electric Ry [1926] 371, a contract for H

engineering works provided that any disputes arising should be referred to an

arbitrator, who was to be an engineer. One of the parties took out a summons for the

construction of a clause in the contract. It appeared that evidence would be needed,

both as to custom in such matters and as to the meaning of technical terms used,

before the clause could be construed. The Court of I

1983 TLR p24

MWAKASENDO JA

Appeal, overruling the judge below, held that the proceedings should be stayed. A

We now turn to consider the case of Heyman v Darwins Ltd. [1942] A.C. 356. That

was a decision of the House of Lords in which their Lordships had to answer

questions which are similar to those which we are required to answer in the present

case. In B Heyman v Darwins Ltd. an arbitration clause in a contract provided that

"If any dispute shall arise between the parties hereto in respect of this agreement of

any of the provisions herein contained or anything arising hereout the same shall be

referred for arbitration in accordance with the provision of the Arbitration Act,

1889". A dispute C having arisen between the parties, the appellants commenced an

action against the respondents claiming (a) a declaration that the respondents had

"repudiated and/or evinced an intention not to perform" the contact and (b) damages.

The respondents who admitted the existence of the contract and denied they had

repudiated it, applied to have D the action stayed in order that it might be dealt with

under the arbitration clause. CASSELS, J. in chambers held that the issue involved

only a question of law and in exercise of his discretion refused to grant a stay. The

Court of Appeal allowed the E appeal by the respondents, holding that the

arbitration clause applied and that CASSELS, J. had wrongly exercised his discretion.

The plaintiffs appealed to the House of Lords. In the House of Lords the plaintiffs

argued first that CASSELS, J. in exercising his discretion in favour of the plaintiffs

followed no wrong principle and his discretion F should not be interfered with.

Secondly, it was contended that the plaintiffs had repudiated the contract and the

respondents had accepted this repudiation. Accordingly, the whole contract was at an

end and with it the arbitration clause, so that the dispute did not fall within it. The

respondents countered by arguing that the contract was never G repudiated by

them, and, accordingly, the arbitration clause applied to the dispute. They further

argued that CASSELS, J. exercised his discretion wrongly since no difficult questions

of law were involved in the interpretation of the agreement or of the correspondence;

and that in any case, no sufficient grounds had been shown why the H appellants

should not proceed by way of arbitration in accordance with the agreement.

Their Lordships in their considered judgments were unanimous in holding that the

dispute fell within the arbitration clause and that the action should be stayed. Since

the arguments advanced by the advocates in this case bear some resemblance to those

raised by I counsel before the House of Lords, we think it will be useful if

1983 TLR p25

MWAKASENDO JA

we refer to some excerpts of their Lordships' comments on the principal arguments A

advanced before them. On the argument that a repudiation of a contract has the effect

of ending the contract and with it the arbitration clause, VISCOUNT SIMON, L.C.

put what he conceived to be the correct view of the matter as follows: B

An arbitration clause is a written submission, agreed to by the parties to the

contract, and, like other written submissions to arbitration, must be construed

according to its language and in the light of the circumstances in which it is made. If

the dispute is whether the contract which contains the clause has ever been entered

into at all, that issue cannot go to arbitration under C the clause, for the party who

denies that he has ever entered into the contract is thereby denying that he has ever

joined in the submission. Similarly, if one party to the alleged contract is contending

that it is void ab initio (because, for example, the making of such a contract is D

illegal), the arbitration clause cannot operate, for on this view the clause itself also is

void. But in a situation where the parties are at one in asserting that they entered into

a binding contract, but a difference has arisen between them whether there has been

a breach by one side or the E other, or whether circumstances have arisen which

have discharged one or both parties from further performance, such differences

should be regarded as differences which have arisen "in respect of or "with regard to"

or "under" the contract, and an arbitration clause which F uses those or similar,

expressions should be construed accordingly.

Commenting on the same matter LORD MACMILLAN made the following

observations at pages 370-371: G

If it appears that the dispute is whether there has been a binding contract

between the parties, such a dispute cannot be covered by an arbitration clause in the

challenged contract. If there has never been a contract at all, there has never been as

part of it an agreement to arbitrate. H The greater includes the less. Further, a claim

to set aside a contract on such grounds as fraud, dures or essential error cannot be the

subject-matter of a reference under an arbitration clause in the contract sought to be

set aside. Again, an admittedly binding contract containing a general arbitration

clause may stipulate that in certain events the contract shall come to an I end. If a

question

1983 TLR p26

MWAKASENDO JA

arises whether the contract has for any such reason come to an end I can see

no reason why A the arbitrator should not decide that question.

LORD MACMILLAN after discussing the question of repudiation and its effect on the

B existence of a contract, made the following pertinent observations regarding the

true nature and function of an arbitration clause in a contract. He said:

I venture to think that not enough attention has been directed to the true

nature and function of C an arbitration clause in a contract. It is quite distinct from

the other clauses. The other clauses set out the obligations which the parties

undertake towards each other but the arbitration clause does not impose on one of

the parties an obligation in favour of the other. It embodies the agreement of both

parties that, if any dispute arises with regard to the D obligations which the one

party has undertaken to the other, such dispute shall be settled by a tribunal of their

own constitution. And there is this very material difference, that whereas in an

ordinary contract the obligation of the parties to each other cannot in general be

specifically E enforced and breach of them results only in damages, the arbitration

clause can be specifically enforced by the machinery of the Arbitration Acts. The

appropriate remedy for breach of the agreement to arbitrate is not damages, but is

enforcement. Moreover, there is F the further significant difference that the courts

in England have a discretionary power of dispensation as regards arbitration clauses

which they do not possess as regards the other clauses of contract.

Although the principles of law ably enunciated by VISCOUNT SIMON, L.C. and G

LORD MACMILLAN in the above excerpts fully demonstrate the futility of Mr.

Lakha's arguments in this court and in the court below, this outline of the decided

cases which are relevant to the matter before us, would be incomplete without a

reference to the judgment of LORD WRIGHT in Heyman v Darwins Ltd. That master

of the H English common law answers the question whether the issues in dispute in

that case were fit and proper matters to be referred to arbitration, in these words at

page 389:

I need not quote authorities for what has been said so often, that under a

general submission I the arbitrator is appointed to

1983 TLR p27

MWAKASENDO JA

decide issues both of fact and of law. In the background, indeed, is the courts,

jurisdiction to A set aside an award if it is bad in law on its face, and the opinion of

the court on issues of law may be invoked by means of cases stated under the Acts of

1889 and 1934, but, if the submission is general, it will require some substantial

reason to induce the court to deny its B due effect to the agreement of the parties to

submit the whole dispute, whether it includes both fact and law or is limited to either

fact or law. In the present case I can find no sufficient reason. The dispute is of the

most ordinary character. C

This is as clear a statement of the law on the subject with which we are concerned as

anyone is likely to come across. The Employer and the Contractor in this case by their

agreement, which follows closely the standard R.I.B.A. form of contract, have chosen

to submit their "disputes or differences" as to the construction of the contract or as to

any D matter or anything of whatever nature arising thereunder or in connection

therewith", to arbitration. On the authorities reviewed above, it seems to us that the

operation of the arbitration clause in the contract to which this case relates does not

depend on the question whether the dispute that has arisen includes both fact and

law or is merely E limited to either fact or law. If it is clear from the submission, as it

is in this case, that the parties have agreed to submit all their "disputes or differences

arising "under" the contract to an arbitrator, then the dispute must go to arbitration

unless there is some good reason to justify the court to override the agreement of the

parties. In the present case we can F find no good reason to do so and we are

accordingly of the opinion that the learned High Court Judge properly exercised his

discretion in ordering a stay of proceedings in this case.

In the result this appeal fails and is dismissed with costs. G

Appeal dismissed

1983 TLR p28

A