In applying for stay of proceedings pending arbitration under section 5(2)(b) of the Arbitration and Conciliation Act, the applicant does not have to adduce documentary evidence showing the steps he has taken in respect of the commencement of the arbitration.

Introduction

In the recent case of Dr. Charles Mekwunye v Lotus Capital Limited, Stanbic IBTC Asset Management Limited, MTN Nigeria Communications Limited, HIS Holding Limited, and INT Towers Limited,[1] the Court of Appeal sitting in Lagos, deviated from precedent when it held that an applicant seeking stay of proceedings pending arbitration does not have to  adduce evidence to show that it is willing to participate in the arbitration in fulfilment of the requirement of section 5(2)(b) of the Arbitration and Conciliation Act (“the ACA”).[2] The Court of Appeal held that it is sufficient to depose in the affidavit in support of the application for stay of proceedings that the applicant is willing to ‘do all things necessary to the proper conduct of the arbitration’.  

Facts

The Appellant commenced an action at the High Court against the Respondents through a Writ of Summons dated 27 March 2015 and other accompanying processes. In response, the 1st Respondent filed a motion for stay of proceedings pending reference to arbitration as contained in the contractual agreement of the Appellant, the 1st Respondent, and the 2nd Respondent. The other Respondents also filed preliminary objections and applications opposing the suit, seeking to strike out or dismiss the suit on various grounds such as misjoinder, non-disclosure of reasonable cause of action, incompetence, abuse of court process, and want of jurisdiction.

The High Court heard all applications challenging the suit and delivered its ruling where it held that it could not hear the Appellant's claims until reference had been made to arbitration in accordance with the contractual agreement, which is a condition precedent to the exercise of its jurisdiction.

Dissatisfied with the decision, the Appellant appealed to the Court of Appeal. One of the issues for determination at the Court of Appeal, was whether the High Court was right to have ignored section 5(2)(b) of the ACA, and the decisions of the Court of Appeal in M.V. Panormos v Olam (Nig) Plc[3] and UBA v Trident Consulting Limited,[4] which were cited to the court by the Appellant, as authorities on the requirements for granting an application for stay of proceedings pending arbitration.

Appellant’s Submission

The Appellant argued that the High Court went against the principle of stare decisis in refusing to be bound by the Court of Appeal’s decisions in M.V. Panormos v Olam (Nig.) Plc (supra) and UBA v Trident Consulting Limited (supra). By these decisions, in applying for stay of proceedings, it is not enough for an applicant to merely depose that he is ready and willing to do all things necessary for causing the said matter to be decided by arbitration and for the proper conduct of such arbitration. An applicant must also show that it has commenced or initiated the arbitral process before making the application for stay. The Appellant relied on section 5 (2)(b) of the ACA in making this submission and argued that since the 1st Respondent failed to show by its affidavit evidence that it had initiated the arbitral process in compliance with section 5(2)(b) of the ACA, the court ought not to have granted the application for stay of proceedings.

1st Respondent’s Submission

The 1st Respondent argued that the Appellant did not contradict the 1st Respondent’s avowed willingness to participate in the arbitration proceedings as deposed in its affidavit, and that facts not controverted are deemed admitted. The 1st Respondent distinguished the cases of M.V. Panormos v Olam (Nig.) Plc (supra) and UBA v Trident Consulting Limited (supra) from the present case noting that in the instant case, the willingness of the 1st Respondent to partake in arbitration was not in issue.[5] The 1st Respondent therefore argued that the said cases should not apply and submitted that the decision in Onward Enterprises Limited v. M.V. "Matrix" & Ors [6] overturned the decision in M.V. Panormos v. Olam (Nig.) Plc (supra).[7]

Court of Appeal Decision

The Court of Appeal considered the provision of section 5(2)(b) of the ACA which states that:

“A court to which an application is made under subsection (1) of this section may, if it is satisfied-

 (b) that the applicant was at the time when the action was commenced and still remains ready and willing to do all things necessary to the proper conduct of the arbitration, make an order staying the proceeding.”

It also considered the decision in Onward Enterprises Limited v M.V. "Matrix" & Ors. (supra) where the Court of Appeal held that stay of proceedings pending reference to arbitration in a foreign country could be granted in deserving cases. The court agreed with the 1st Respondent that M.V. Panormos v. Olam (Nig.) Plc (supra) does not stand as an authority on the issue of granting stay of proceedings pending reference to arbitration.  

It further considered the case of UBA v Trident Consulting Limited (supra) where the Court of Appeal held that for an application for stay of proceedings pending arbitration to succeed, the applicant must adduce documentary evidence showing the steps he has taken in respect of the commencement of the arbitration. It noted the duty of the court to give effect to the clear and unambiguous provisions of the law and not distort same.  It emphasised that by section 5(2) of the ACA, the high court has the discretion to grant an order of stay of proceedings pending arbitration if it is satisfied that there is no sufficient reason why it should not refer the matter to arbitration in accordance with the arbitration agreement, and the party making the application is ready and willing to do all things necessary to the proper conduct of the arbitration.

The court disagreed with its earlier decision in UBA v Trident Consulting Limited (supra) and held that placing the burden of presenting documentary evidence to support an application for stay of proceedings pending arbitration constitutes a departure from the plain provisions of section 5(2) of the ACA particularly in cases where the applicant has deposed to facts in that regard.

It noted that the purpose of a deposition in an affidavit is to provide oral or documentary evidence to support an application filed in court. Thus, the affidavit in itself constitutes evidence which is deemed admitted where not countered or controverted. The court further stated that the reasoning in UBA v Trident Consulting Limited (supra) would only be potent where an applicant's deposition in the affidavit in support of an application for stay is challenged and/or contradicted by a respondent. In such cases, it will be necessary for the applicant to provide further evidence in support of his deposition in that regard, which is not the case in the instant appeal.  Since the Appellant did not refute the deposition in the 1st Respondent’s affidavit, the High Court was at liberty to act upon the deposition that the 1st Respondent is willing and ready to ensure that the arbitration is properly conducted, thereby fulfilling the requirement in section 5(2)(b) of the ACA. The court resolved this issue in favour of the 1st Respondent.

Comment

Prior to this decision, the position of the law regarding an application for stay of proceedings pending arbitration is that the applicant must demonstrate that he is willing to arbitrate by some visible means. Therefore, it was not sufficient to merely depose in an affidavit that the applicant is willing to arbitrate. This principle is was laid down in M.V. Panormos v Olam (Nig.) Plc (supra), where the Court of Appeal held that:

I agree with the learned counsel for the respondent that the appellants ought to have shown in their affidavit by means of documentary evidence, the steps they took or they intended to take for the proper conduct of the arbitration. It is not enough for them to have merely deposed that they were ready and willing to do all things necessary for causing the said matter to be decided by arbitration and for proper conduct of such arbitration.[8]

Although the Court of Appeal in Onward Enterprises Limited v M.V. "Matrix" & Ors. took a different view from the court in the M.V. Panormos case on the issue of whether the court can stay proceedings pending arbitration under the Admiralty Jurisdiction Act, it did not take a different position on the issue of providing documentary evidence to demonstrate willingness to participate in arbitration, pursuant to section 5(2)(b) of the Arbitration Act. In fact, the court specifically stated that:

“The respondent timely set in motion arbitration proceedings by appointing their arbitrator in compliance with Clause 40 of the Charter-party agreement endorsed by both parties… Section 5(1) of the Arbitration and Conciliation Act clearly shows that the party praying for arbitration as an applicant has the duty to comply with section 5(2)(b) of the said Act by commencing the arbitration proceedings… The approach of the respondents clearly indicates that they are ready and willing to do all things necessary to the proper conduct of the arbitration.”[9](Emphasis added.)

Thus, in that case, the appointment of an arbitrator before the party applied for a stay was held to constitute evidence of the applicant’s readiness and willingness to arbitrate the dispute.

Furthermore, in the case of UBA v Trident Consulting Limited (supra), the Court of Appeal held that:

“Before a stay may be granted pending arbitration, the party applying for a stay must demonstrate unequivocally by documentary and/or other visible means that he is willing to arbitrate. He does so satisfactorily by notifying the other party in writing of his intention of referring the matter to arbitration and by proposing in writing an arbitrator or arbitrators for the arbitration.”[10] (Emphasis added.)

These decisions no longer stand as law, because based on the judgment of the Court of Appeal in Mekwunye’s case , a deposition in an affidavit is now sufficient to satisfy the requirement of section 5(2)(b) of the ACA without more. The burden is on a respondent to controvert an applicant by deducing facts to show that the applicant is not willing or ready to do all things necessary to the proper conduct of the arbitration. It is only where such a respondent successfully discharges this burden that an applicant must then provide supporting documents to the contrary (for instance, a notice of arbitration or a letter appointing its arbitrator).