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SCZ Judgment No. 1/2015

IN THE SUPREME COURT OF ZAMBIA APPEAL NO.
29/2011
HOLDEN AT KABWE
SCZ/8/23/2011
(Civil Jurisdiction)

BETWEEN:
AUDREY NYAMBE APPELLANT
AND
TOTAL ZAMBIA LIMITED RESPONDENT

CORAM: Mwanamwambwa Ag DCJ, Kaoma JS, and Lisimba Ag JS

On 8th April, 2014, and 13th January, 2015.

For the Appellant: Mr. M. Chiteba - Mulenga Mundashi, Kasonde

Legal Practitioners
For the Respondent: Mr. A. Chisenga - Corpus Legal Practitioners

JUDGMENT

Kaoma JS, delivered the Judgment of the Court

Cases referred to
1. Leopard Ridge Safaris Limited v Zambia Wildlife Authority (2008) Z.R.
97
2. Konkola Copper Mines Plc v NFC Africa Mining Plc – Appeal No.
118/2006
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3. Zambia National Holdings Limited and another v The Attorney General

(1993/1994) Z.R. 115
4. Heyman & another v Darwins Limited (1942) 1 ALL ER 337
5. Ashville Investments v Elmer Constructors Limited (1988) 2 ALL ER 577

(2)

Statute referred to:

1. Arbitration Act No. 19 of 2000

This is an appeal against the decision of the High Court,

staying proceedings before it and referring the matter to

arbitration, under section 10 of the Arbitration Act No. 19 of 2000

(the Act). The sole ground of appeal is that the learned trial judge

misdirected herself in law and fact when she ordered that the

proceedings be stayed and the matter sent to arbitration.

The background to the matter is that on 1 st April, 2003 the

appellant and respondent entered into a Marketing Licence

Agreement (the Agreement) in which the appellant was to, inter

alia, sell the respondent's products and conduct ancillary business

at the respondent's filling station. The Agreement contained an

arbitration clause in Article IX (iv), which provided that disputes

arising during the continuance of the contract would be resolved

by arbitration.

The appellant alleged that during the subsistence of the

agreement she experienced problems with the tanks, pumps and

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other equipment at the filling station, which resulted in losses of

fuel and despite being informed about the problems, the

respondent

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failed or neglected to rectify the same. Instead on 1 st June, 2004,

the respondent terminated the Agreement without notice.

The appellant commenced proceedings in the High Court,

seeking, inter alia, a declaration that the purported termination of

the Agreement was wrongful, illegal and null and void. The

respondent denied the appellant's claims and counterclaimed,

inter alia, damages for breach of contract and special damages.

The trial proceeded before Mr. Justice T.K. Ndhlovu, who

heard the matter in full, but did not render his judgment at the

time of retirement. The matter was then reallocated to another

Judge, who ordered that it be heard de novo. But before trial

could commence, the respondent applied under section 10 of the

Act for stay of proceedings and reference of the matter to

arbitration.

Upon hearing both parties, the learned Judge stayed the

proceedings and referred the matter to arbitration. She applied

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the case of Leonard Ridge Safaris Limited v Zambia Wildlife

Authority1 where this Court held that in considering an application

for stay of proceedings under section 10 of the Act, the learned

Judge had no choice but to refer the dispute to arbitration as

provided for in the

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agreement between the parties. Dissatisfied with the decision, the

appellant appealed to this Court.

Both the appellant and respondent have relied entirely on

their written heads of argument. The gist of the appellant's

arguments is that the order by the lower court, staying

proceedings and referring the matter to arbitration in line with the

provisions of section 10 of the Act, was a misdirection in law.

Counsel for the appellant has cited section 10 of the Act and

submitted that the lower court misdirected itself in interpreting

this provision and failed to appreciate its full meaning. He has

also directed us to the first line of Article IX (iv) and to the phrase

“during the continuance of this agreement” and argued that

the arbitration clause limits itself to the time during the

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continuance or subsistence of the agreement; and is not

applicable after the termination of the Agreement. It is argued

that the respondent terminated the Agreement, without notice, on

1st June, 2004, so the arbitration clause is inoperative or incapable

of being performed.

(5)

It is contended that the learned Judge should have directed

her mind to the fact that much as the doctrine of severability of

an arbitration clause is accepted, it is the construction of the

arbitral clause itself as opposed to the contract that she was

supposed to consider.

That it is clear from the arbitration clause that when the

respondent terminated the Agreement, it effectively ousted the

arbitration clause and as such it could not be relied on as it had

become inoperative or incapable of being performed.

It is also argued that there was a time limit within which

arbitration could take place or an arbitrator appointed. That an

aggrieved or affected party was required to give written notice of

not less than 21 days to the other party and each party was
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required within 14 days of the date of expiry of the written notice

to appoint an arbitrator. However, if arbitration proceedings are

not brought within the time frame stipulated then there would be

no arbitration; and in fact from the date of termination of the

agreement there was no reference to arbitration within the

stipulated period of time.

(6)

Counsel for the appellant has further submitted that the

matter actually went to trial and was concluded but the retired

Judge did not deliver judgment. After the matter was allocated to

another judge the respondent then applied that the matter

proceeds to arbitration, but the application was made well after

the time limits had expired and the arbitration agreement had

become inoperative or incapable of being performed.

On the other hand, counsel for the respondent has

submitted, in response, that the appeal is without merit and is

misconceived in that the learned Judge was on firm ground, both

in law and in fact to refer the matter to arbitration; and the

appellant has not demonstrated how the learned Judge

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misdirected herself and has raised the ground of appeal in vacuo.

That there are a plethora of authorities that are in line with

section 10 of the Act; and in Konkola Copper Mines Plc v NFC

Africa Mining Plc2, emphasis was placed on the fact that a court

has discretion not to stay proceedings and refer the parties to

arbitration, where the plaintiff demonstrates that the arbitration

agreement is null and void, inoperative, or incapable of being

performed.

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It is argued that it is trite law that though the High Court has

unlimited jurisdiction to hear and determine any dispute, such

jurisdiction is not limitless and must be exercised in accordance

with the law as confirmed in the case of Zambia National Holdings

Limited and another v The Attorney General 3; and that in cases

where parties have agreed to settle any dispute between them by

arbitration, the court’s jurisdiction is ousted unless the agreement

is null and void, inoperative, or incapable of being performed.

It is submitted that this principle of law reinforces the

freedom that the parties have to arbitrate as opposed to being

forced to litigate whenever there is a dispute. The case of Leonard

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Ridge Safaris Limited v Zambia Wildlife Authority 1 is also relied

on.

Counsel for the respondent has submitted further that even

if the appellant was to contend that the termination of the

contract rendered the arbitration clause inoperative, it is trite law

that an arbitration clause or agreement is separate and

independent, and survives the agreement embodying it. To

buttress his point, he referred us to the case of Heyman &

another v Darmins Limited4, in which Lord MacMillan put the

matter as follows at page 347:

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“I venture to think that not enough attention has been
directed to the true nature and function of 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 obligations which the other party has
undertaken to the other such dispute shall be settled by
a tribunal with their own constitution ....... the arbitration
clause survives for determining the mode of their
settlement. The purposes of the contract have failed, but
the arbitration clause is not one of the purposes of the
contract. ”

We have examined the ruling appealed against and

considered the submissions by both parties and the authorities

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cited for which we are grateful. The only question that arises for

determination from the sole ground of appeal is whether or not, in

view of the wording of the arbitration clause in the Agreement,

the proceedings were properly stayed and referred to arbitration.

Quite clearly, the law is settled as far as the jurisdiction of

the High Court is concerned in matters where a contract

embodies an arbitration clause. Section 10 of the Act provides as

follows:

"A court before which legal proceedings are brought in a

matter which is subject to an arbitration agreement shall,
if a party so requests at any stage of the proceedings and
notwithstanding any written law, stay those proceedings
and refer the parties to arbitration unless it finds that the

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agreement is null and void, inoperative or incapable of

being performed."

Counsel for the respondent is right that we have passed a

number of decisions where we have given effect to section 10 of

the Act. However, in determining whether a matter is amenable to

arbitration or not, it is imperative that the wording used in the

arbitration clause itself are closely studied.

In this case the arbitration clause which was embodied in

Article IX (iv) of the Agreement reads as follows:

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“If at any time during the continuance of this agreement,

any dispute, differences or questions relating to the
construction, meaning or effect of this agreement or any
clause herein shall arise between the parties, then the
aggrieved party shall give written notice or the affected
party shall give written notice of not less than 21 days to
the other party herein. Each party shall within 14 days of
the date of expiry of the written notice aforementioned
appoint an arbitrator. The matter shall therefore be
referred to the two arbitrators.”

Using the literal rule or plain meaning rule of interpretation,

which says that ordinary words must be given their ordinary

meaning, we agree with counsel for the appellant that the words

"At any time during the continuance of this agreement...”

in Article IX (iv) means that the parties had limited the disputes to

be referred

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to arbitration to disputes arising between them during the

continuance or subsistence of the agreement.

Furthermore, the parties had agreed that written notice of

not less than 21 days had to be given to the other party, from the

time the dispute arises between them, and within 14 days of the

date of expiry of the written notice each party was to appoint an

arbitrator.
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We find the words of Article IX (iv) to be clear, precise and

unambiguous and thus should be taken in their natural and plain

meaning. We are fortified by the words of May, LJ in the case of

Ashville Investments v Elmer Constructors Limited 5, at page 58:

“In seeking to construe a clause in a contract, there is

scope for adopting either, a liberal or a narrow
approach, ... the exercise which has to be undertaken is
to determine what the words used mean”.
In this case, the dispute between the parties relates to the

manner, in which the Agreement was terminated. Therefore, the

dispute between the parties occurred after the termination of the

Agreement and not during its continuance. Whilst we agree with

counsel for the respondent that an arbitration clause is separate

and independent, and survives the agreement embodying it, and

the words of Lord MacMillan in Heyman & another v Darmins

Limited4,

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are apt, as counsel for the appellant has rightly submitted, the

learned Judge should have first considered the wording of the

arbitration clause as opposed to its severability.

In our view, this matter is distinguished from the cases cited

by counsel for the respondent. For instance, in Leopard Ridge

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Safaris Limited v Zambia Wildlife Authority 1, the issue was not

interpretation of the arbitration clause, but whether the

application for leave to apply for judicial review were proceedings

to warrant the trial court, upon being requested by the

respondent, to refer the parties to arbitration; and whether the

declaration of the dispute should have been preceded by the

three stages of good faith negotiations, mediation and arbitration.

There were no such restrictions in the arbitration clause as are in

the case at the bar.

It is clear that even if the Arbitration Act gives a guide on the

form of an arbitration agreement, it does not dictate what terms

the parties should include in their arbitration clause. We have no

doubt that the parties before us were within their contractual

rights when they agreed to limit arbitration to any disputes arising

during the

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continuance of the agreement and to limit the time period within

which the arbitration could be commenced.

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We have no doubt that at the time the dispute between the

parties arose, and indeed at the time the matter was referred to

arbitration, the arbitration clause had become inoperative and

incapable of being performed. In view of all the foregoing, we find

that the learned Judge erred when she stayed the proceedings

before her and referred the matter to arbitration.

Therefore, we set aside the order of the learned Judge.

Instead we order that the matter be heard by the High Court

before another Judge. All in all, we allow the appeal and award

costs to the appellant to be taxed in default of agreement.

______________________________
M. S. MWANAMWAMBWA
Ag. DEPUTY CHIEF JUSTICE.

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_____________________________
R. M. C. KAOMA
SUPREME COURT JUDGE.

_______________________________
M. LISIMBA
Ag. SUPREME COURT JUDGE.