IN THE HIGH COURT OF LESOTHO
COMMERCIAL DIVISION
HELD AT MASERU CCT/0435/2022
In the matter between:
KESI MDTE JOINT VENTURE PLAINTIFF
AND
WATER AND SEWAGE COMPANY DEFENDANT
Neutral Citation: Kesi MDTE Joint Venture v Water and Sewage Company [2024] LSHC 100 Comm. (13 JUNE 2024)
CORAM: MOKHESI J
HEARD: 8 May 2024
DELIVERED: 13 June 2024
Summary
CIVIL PRACTICE AND PROCEDURE: A party to an arbitration agreement instituting legal proceedings – the defendant raising a special plea of lack of jurisdiction- Held, once an unequivocal objection is raised against litigation, the court does not have jurisdiction in the matter.
ANNOTATIONS
Legislation
Arbitration Act 1980
Cases
Anzen Limited v Hermes One Limited [2016] UKPC 1
Bataung Chabeli construction (Pty) Ltd v Road Fund and Others C of A (CIV) 34/2020 dated 14 May 2021
Crompton Street Motors Cc v Bright Idea Projects 66 (Pty) Ltd 2022 (1) SA 317 (CC)
Graaff-Reinet Municipality v Van Ryneveld’s Pass Irrigation Board 1950 (2) SA 420 (A)
Phomolong Investment ((Pty) Ltd v KEL Property Company (Pty) Ltd C of A (CIV) 28/2022 dated 11 November 2022.
Tšokolo Franz Kompi and 12 Others v Government of the Kingdom of Lesotho and 7 Others C of A (CIV) 43B/2021
Yorigami Maritime Construction v Nissho – IwaI 1977 (4) SA 682
JUDGMENT
[1] Introduction
This matter concerns interpretation of an arbitration clause, the issue being whether, the court lacks jurisdiction to hear the matter, where the plaintiff had instituted an action for recovery of contractual damages, before seeking to arbitrate the dispute between the parties. At the heart of the contention before this court is whether the presence of the word “may” in the arbitration clause gives the plaintiff an option whether to arbitrate or litigate. Clause 8 of the said contract provides that:
“II. General Conditions of Contract
8.2 Any dispute between the parties as to matters arising pursuant to this contract that cannot be settled amicably within thirty (3) days after receipt by one party of the other party’s request for such amicable settlement may be submitted by either party for settlement in accordance with the provisions specified in the S.C.
III. Special Conditions of Contract
7.1 ….
8.2 Disputes will be settled by arbitration in accordance with the Applicable law. The word “Applicable Law” covers all the laws of Lesotho based on the definition section contained the Arbitration Act 1980 in Lesotho.”
[2] Backgrounds Facts
The parties entered into a written contract of consultancy. As it is often the case with most contractual engagements, a dispute broke out between the parties leading the plaintiff to sue out summons against the defendant claiming payment of a certain sum of money plus interest. The defendant raised a special plea of lack of jurisdiction on the part of the court to hear the matter on account of the presence of arbitration clause in the contract between the parties. After raising the special plea, the defendant pleaded over.
[3] The manner in which the defendant objected to these proceedings should be seen in the light of the Court of Appeal decisions in Tšokolo Franz Kompi and 12 Others v Government of the Kingdom of Lesotho and 7 Others C of A (CIV) 43B/2021; Bataung Chabeli construction (Pty) Ltd v Road Fund and Others C of A (CIV) 34/2020 dated 14 May 2021; Phomolong Investment ((Pty) Ltd v KEL Property Company (Pty) Ltd C of A (CIV) 28/2022 dated 11 November 2022. In all these cases the Court of Appeal has construed the presence of an arbitration in contract as a jurisdictional issue entitling the respondent to raise an issue of lack of jurisdiction, instead of it being one for stay of proceedings pending the determination of arbitration. Once this characterisation is adopted it leads to anomalies in the analysis of the law in the light of Section 7 of the Arbitration Act 1980 (“the Act”) as will be seen later in this judgment.
[4] There is a huge difference between the legal concepts of stay of proceedings and jurisdiction. In the former the court has jurisdiction over the matter but merely halts the proceedings until a legal determination is made on a certain aspect having a bearing on the case. Jurisdiction on the other hand refers to what the court in Graaff-Reinet Municipality v Van Ryneveld’s Pass Irrigation Board 1950 (2) SA 420 (A) at 424. said is “….the power or competence of a Court to hear and determine an issue between parties.” The approach of the Court of Appeal had led to a practice where litigants when faced with another who seemingly want to run away from arbitration by launching proceedings before the courts, the former simply raises a legal point that the High Court has no jurisdiction to hear the matter. This approach is at odds with the position of our law as espoused in Section 7 of the Act. S. 7 which provides that if a party institutes court proceedings in circumstances where he is a party to an arbitration agreement, the other party can apply for stay of the proceedings or raise a special plea of stay of proceedings, not lack of jurisdiction (See a South African decision dealing with Section 6 of Arbitration Act 42 of 1965 which is similar to S. 7 of our Act: Crompton Street Motors Cc v Bright Idea Projects 66 (Pty) Ltd 2022 (1) SA 317 (CC) at para. [32]).
[5] See also the following dicta which is in synch with Section 7 of our Arbitration Act 1980 – in Yorigami Maritime Construction v Nissho – IwaI 1977 (4) SA 682 at p. 692 E – F where the court said:
“In our law an arbitration clause does not oust jurisdiction of the court and, if a party to an agreement seeks to rely on an arbitration clause when sued on that agreement, the court has a discretion as to whether or not it should itself determine the dispute or whether it should order the proceedings to be stayed pending the arbitrator’s decision …”
[6] However, the above be as it may, the defendant raised an issue of lack of jurisdiction on the part of the court to hear the matter because of the presence of arbitration clause in the contract between parties. Confronted with the decisions of the Court of Appeal alluded to above that this court does not have jurisdiction where parties concluded arbitration agreement, the plaintiff shifted the goal posts to now base its argument on the wording of clause 8.2 of the contract, the focus now being on the word “may” as used in the clause. The essence of the argument is that because the parties have opted to using the words “may be submitted by either party for settlement” in accordance with the laws applicable to arbitrations in Lesotho, gives the plaintiff a latitude to either go through the route of arbitration or litigation to seek resolution of their disputes. Regrettably, no authorities were cited for this position as applicant’s counsel seemingly did not do relevant legal research. In view of the Court of Appeal’s approach alluded to above, I will try to come up with the interpretation which does not offend the apex court’s approach because I am bound by precedent.
[7] The words now under consideration were in issue in the Privy Council matter of Anzen Limited v Hermes One Limited [2016] UKPC 1. In this matter the court interpreted the words “any party may submit the dispute to binding arbitration” to be permissive, leaving a party who is faced with a counterpart who has initiated litigation to unequivocally request the latter to submit a dispute to arbitration or to apply for stay. The court stated that as a general principle, arbitration is underpinned by consent between the parties, and therefore, those parties are mutually obliged to cooperate to solve their disputes as agreed in the arbitration agreement. The court was of the view that this mutual obligation to pursue arbitration as a preferred dispute resolution:
“[34] … should influence the construction of clause 19.5 which contemplates a consensual approach, first involving negotiation …. To see if any dispute which has arisen can be resolved amicably and then, if negotiations are unsuccessful, enables either party to submit the dispute to arbitration. An analysis whereby notice will trigger the mutual agreement to arbitrate a dispute appears to the Board to fit better into a consensual scheme than one which requires the artificial construction, and commencement of arbitration in respect of, a cross-claim.”
[8] In the present matter, in my judgment, once the defendant raised a special plea of lack of jurisdiction, the court is enjoined to wash its hands off the matter and leave the matter in the hands of the arbitrators to adjudicate the dispute – the court, as the Court of Appeal has directed, lacks jurisdiction. The special plea of jurisdiction is a sufficient and an unequivocal objection to litigation as a means of recourse to solving the dispute between the parties. The plaintiff’s contention that the word “may” gives it a latitude whether to litigate or submit a dispute to arbitration is, therefore, found to be a sound one, but once the other party unequivocally raises an objection to litigation, the Court ceases to have jurisdiction over it.
[9] In the result the following order is made:
The special plea succeeds with costs.
______________________
MOKHESI J
For the Plaintiff: Mr M. G Makara from Makara and Monethi Inc.
For the Defendant: Adv. S. Shale instructed by Dr. I. M. P Shale Attorneys