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JUDGMENT
OWUSU-ANSAH, J.A.:
This was a Motion to
set aside an award made by a Panel of arbitrators in a
dispute between the parties herein.
Briefly, the facts are
that BUGUDON COMPANY Limited and KAROUCHI UNIVERSAL
LIMITED entered into an agreement on the 13th July,
1996, under which 51% shares held by one Kwame Dzadey,
Junior, were transferred to Karouchi Universal Ltd.
The consideration was
for US $75,000.0 and was made payable not later than
31st December, 1996. It was further agreed that BUGUDON
would create some more shares to accommodate the
purchase made by Karouchi Universal.
The parties went on to
agree that any dispute arising between them would be
settled by arbitration.
Meanwhile, on the 30th
June 1996, shares were valued and a Report published on
them which valuation Karouchi Universal disputed.
There was thus a
dispute between the parties as envisaged by the
Agreement.
First as to whether or
not the shares purchased by Karouchi Universal were
fully paid for:
Secondly, whether or
not the shares purchased by Karouchi constituted 75% of
the shares in BUGUDON.
Thirdly, whether or not
Karouchi Universal had brought in any money in
accordance with the agreement.
Fourthly, whether or
not BUGUDON owed its Directors ¢2.3 billion.
The Dzadeys sued
Karouchi Universal in suit No.C.714/94 in the High
Court, Accra, and the Court ordered the parties to go
into arbitration in terms of the agreement. The parties
after initially disputing the correctness of the order
subsequently agreed to go to arbitration and it was
expressly provided that the arbitrators were to
determine.
(a) Whether or not the
51% shares originally acquired by Karouchi Universal
from Kwame Dzadey Junior, had been duly paid for;
(b) If the said 51%
shares have been fully paid for how much was left to be
paid and if there was an overpayments, how much that
was;
(c) Whether or not the
shares subsequently acquired by Karouchi Universal from
Kwame Dzadey Junior and 18 other shareholders of Bugudon
have been fully paid for, and to determine whether or
not any further payment or refund has to be made by
either party.
(d) To determine the
percentage of shares now held by the Dzadey’s and
Karouchi Mining Company Ltd. having regard to the
Governments 10% fee which carried interest in Karouchi
Mining.
(e) To determine the
present day value of the remaining shares now held by
the Dzadey’s in Karouchi Mining.
(f) Whether or not
Bugudon Limited owe some of the Directors of BUGUDON any
sum of money by way of loan advanced to Bugudon which
remains outstanding, and if so how much?
(g) Whether or not
Karouchi Universal has any money in Karouchi Mining and
if so, how much.
(h) Any other matter
reasonably relating to the matters referred to through
(a) to (g)
The Parties herein
nominated an arbitrator each and one Mr. E.A. Forson a
Chartered Accountant was appointed an Umpire. The
Arbitrators after hearing the parties and examining
documents, and Exhibits submitted to them, made an award
on the 18th May, 2000.
The award was exhibits
A.KD.11 and KU3 in this application and same is sought
to be set aside, on the grounds stated in both the
Affidavit in support of this application basically on
the grounds that the arbitrators misconduct themselves.
They also alleged perverseness and mistakes or errors of
facts and uncertainty.
The application was
vehemently opposed by the respondents.
The application was
apparently made under section 26(1) of the Arbitration
Act 1961 (Act 38). It reads: "where an Arbitrator or an
Umpire has misconducted himself in the proceedings the
Court may remove him or set aside an award or both”
In a reasoned ruling
delivered on the 8/5/01 the High Court, Accra, dismissed
the Appellant’s application and confirmed the
Arbitration award, thereupon the appellants filed the
present appeal against the Ruling of the High Court. Two
additional grounds were subsequently filed on the
30/10/01.
Let us now consider
ground ‘A’. That is to say that “the Arbitrators lacked
jurisdiction at the time they made the award and
consequently the award is void and of no effect”
The issue of
jurisdiction was not raised in the High Court. That
notwithstanding, this Court can entertain it since the
question of jurisdiction can be raised at any time.
The basis of that is
the Arbitration Agreement itself which provided, inter
alia, that the award should be delivered on or before
the 30th day of November, 1999 “or any later day to
which the said Arbitrators or their Umpire may by
writing under their or his hand indorsed on the
agreement from time to time enlarge the time for making
their or his said award”.
Furthermore, section 17
of the Arbitration Act, 1961, (Act 38) provides that
“subject to subsection 1 and to the arbitration
Agreement, an Arbitrator or Umpire may make an Award at
any time”.
It is also significant
to note that in the 4th Edition of Halsbury’s Laws of
England Vol. 2 from page 310, it is expressly stated
that “Even where the time for making the award is
limited, whether under the Act or otherwise, the High
Court or a Judge thereof may enlarge the time so limited
whether it has expired or not. But an Arbitrator or an
Umpire must use all reasonable dispatch in making his
award or he may be removed by the High Court and will
then lose his right to remuneration”.
In my view two basic
principles can be deduced from this statement of the
law; First the Arbitrator or Umpire must use all
reasonable dispatch in making his award; and secondly,
he may otherwise be removed by the High Court whereupon,
thirdly, he will lose his right to remuneration.
It does not state that
the award will thereby be necessarily rendered null and
void for lack of jurisdiction. The parties would have
applied to the Court to remove the arbitrators, etc.
It is clear that an
enlargement of time by consent of the parties amounts in
law to a fresh agreement where it takes place in
writing.
In this case the power
to extend the time for making the award was under the
terms of the arbitration Agreement given to, and, no
doubt, for the benefit can convenience of, the
arbitrators themselves.
Therefore, the party
seeking to set aside an award as being null and void
under these provisions, must, in my opinion, allude to a
substantial miscarriage of justice as a result, or at
leave demonstrate in some way that he was thereby
prejudiced by the arbitrators non-compliance strict
sense; especially where, as in the instant case, the
delay was unintentional or inevitable or where it was
not inordinate or prejudicial to either party.
Section 17(2) of Act
38, like the Arbitration Agreement to which it is
subject, is clearly intended to expedite or facilitate
the arbitration proceedings and to minimise delay and
expense.
These views are amply
supported by numerous authorities including R.v. Hill
1819 7 price 636
Palmer v. Metropolitan
Rly Co. 1862 31 L.J. Q.B. 259 both English Authorities,
as well as the American case of The State of New York
Dept. of Taxation and Finance v. Valenti 393 NYS. 2d
797.
These authorities lend
weight to the proposition that a party may by his
conduct also be precluded from objecting to an arbitral
award on the grounds that it was made out of time even
though the parties had not expressly consented to the
extension of time.
In any event from the
evidence, particularly exhibits KD.1 dated February 2,
2000 and another letter dated January 11, 2000, it is
obvious to me that the arbitrators, whenever the need
arose, communicated in writing to the parties their
decision to extend the time for making their award.
There is no evidence whatsoever on record that any of
the parties raised any objection thereto when they were
afforded the opportunity in writing to do so.
In the peculiar
circumstances of this case the appellant by his tacit
acquiescence must be deemed to have waived his right to
do so.
See Adisi vs; C.& F CO.
(W.A) Ltd. 1963 2 GLR. 42 at 46 S.C.
If the award had gone
in favour of the appellant, he would almost certainly
not have appealed and probably would have preferred to
let sleeping dogs lie.
In my view it would be
manifestly unjust and unreasonable to set aside the
award on this ground. This ground of appeal therefore
fails and is dismissed accordingly.
That, however, is not
the end of the matter.
The appellant sought to
argue the remaining grounds together that is grounds 1,
2, 3 and 4.
In essence they amount
to this that, by omitting to determine all the
differences which the parties, by their agreement
referred to arbitration, the arbitrators had committed
an act of misconduct, and that is a valid ground for
setting aside the award pursuant to Section 26 of the
Arbitration Act 1961 (Act 38).
That section,
unfortunately, is silent as to what amounts to
misconduct.
In view of the paucity
of local authority on the subject we must look elsewhere
for assistance, and this can be found in Halsbury’s Laws
of England 4th Edition Vol. 2 page 330 paragraph 662
which states inter alia, that it amounts to misconduct
“If the arbitrator or umpire fails to decide all the
matters which were referred to him”
In this case, it was
alleged that the arbitrators were guilty of misconduct
because:
(1) They failed to
decide all matters which were referred to them
(2) The award was
uncertain in some respects
(3) They examined
expert witnesses in the absence of the applicant and on
account of this deprived the applicants of the
opportunity to cross-examine, hear or challenge the
experts.
The applicant is not
questioning the validity of the Agreement nor is he
quarrelling with the composition of the panel but the
substance of the award at least in part.
This Court must
therefore endeavor to arrive at a decision which will
save the award if that is consistent with the basic
tenets of justice and fair play.
In line with the
English case of Selby vs:Whitbread & Co. 1917 1KB 748
wherein MC. Cardie J, held that where the award dealt
with distinct matters not dependent upon or necessarily
connected with each other then they must be severable.
Thus the award can be
upheld in part, confirmed, varied, or set aside as
provided under Section 25 (1) of the Act (38).
It was contended on
behalf of the appellants that the arbitrators failed to
decide on all the matters referred to contrary to the
principles enunciated in Wakefiled vs: Llanelly and Dock
Company 1865 3 De G.J. & SM 11, that the final award
must deal with all the issues put to the arbitrators.
In particular it was
argued that although by clause 2(g) of the operative
part of the Arbitration Agreement, the arbitrators were
enjoined to find out “whether or not Karouchi Universal
had invested any money in Karouchi Mining and if so how
much? The arbitrators failed to resolve the issue.
The arbitrators took
the view that consideration of this matter would have
entailed an in-depth accounting review of the audit.
That accounting had not been referred to them and,
therefore, to do so or to attempt or commence doing so
would have resulted in the arbitrators staying outside
the scope of their arbitration and the matters referred
to them, and therefore amount to clear absence of
jurisdiction.
The learned judge
analysed the evidence in detail and in depth and came to
the conclusion, which I share, that reference to
arbitration did not mean that the arbitrators must
necessarily give positive answers to all the issues.
What was expected of them was to give attention or
consideration to the issues raised which was done in
this case. The approach adopted by the Arbitrators may
not be the most desirable or effective but it cannot be
said that they overlooked the issues.
It was submitted that
any moneys that Karouchi Universal invested in Karouchi
Mining would have been invested subsequent to the share
transactions between Karouchi Universal and the
shareholders of BUGUDON after which BUGUDON
metamorphosed into Karouchi Mining. Hence, any
subsequent investment by Karouchi Universal in Karouchi
Mining would clearly not affect the value of the shares
originally bought from BUGUDON. It was urged upon the
Court that the arbitrators were mandated to find out by
whatever means they found necessary or appropriate how
much money Karouchi Universal had invested in Karouchi
Mining. Finding out how much money Karouchi Universal
had put in Karouchi Mining could not have involved an
in-depth auditing as stated by the High Court. Money
would have been brought in through the Banking System.
It would only be an addition of the various transfers.
Expenditure,
depreciation, etc. did not arise. Appellant contends,
further that by failing to make this award the
arbitrators deprived the parties of information that
could have been used to take several decisions including
a decision as to whether or not in the circumstances the
company should be liquidated.
It would appear that
the issue of the amount of money Karouchi Universal had
invested in Karouchi Mining is quite distinct from the
other issues submitted to the arbitration. That is
clearly severable from other issues. I am impressed by
the submissions on behalf of the appellant in relation
to items 2(e) relating to the present day value of the
remaining shares held by the Dzadey’s in Karouchi; and
2(g) the value of loans given by Karouchi Universal to
Karouchi Mining. I hold that these items are distinct
and severable from the rest, and there can be no
justification in setting aside the whole award.
The appeal would be
allowed to this limited extent. I set aside the award in
relation to items 2(e) and 2(g) and remit the award to
the arbitrators for reconsideration of the said items.
This Court is ill
equipped to engage in that exercise. The appellants
contended further that the Arbitrators called experts in
their absence and without their knowledge, and that they
were consequently not given the opportunity to comment
on or challenge the evidence, and that the High Court
erred in not setting aside the award on account of this
alleged breach of natural justice.
Any award given or
obtained in violation of the rules of natural justice
would be set aside on grounds of policy. This is the
effect of the English case of London Export Corporation
Ltd. vs; Jubilee Coffee Roasting Company 1958 1 All E.R.
494.
It is true that in
reTIOSWELL 1863 Ch.3 Beav.211 it was held that where
arbitrators take any evidence in the absence of one of
the parties that vitiates any award.
However in the instant
case, in regard to the misconduct alleged by the
appellant, the arbitrator appointed by the Appellant
failed to respond. The other arbitrator and the Umpire
maintain that all parties knew or had notice of the
proceedings, and that none of them raised any objection
in the course of the arbitration as to the conduct of
the proceedings, including the examination of witnesses.
It is important to note
clause 7 of the operative part of Exhibit KU2. The
Agreement, it provides:
“In case either party
refuses or fails after reasonable notice to attend
either personally or by Counsel or Solicitor before the
arbitrators or their Umpire at any meeting which he may
appoint, it shall be lawful for them to proceed ex-parte
as effectually as if such party were present”
Clause 8 goes on to
state “Notwithstanding anything to the contrary the
award made by the arbitrators shall be final and binding
on the parties and persons claiming under them
respectively and the parties hereto will in all respects
abide by, observe perform and the said award so to be
made and published as aforesaid.”
In my view where a
party to arbitration proceedings is given adequate
notice of the hearing but deliberately fails or refuses
to avail himself of the opportunity to participate in
the proceedings or to call or ask for permission to
recall a witness for cross-examination on his evidence,
such a party has only got himself to blame.
Any such consequential
award may not be set aside on that ground alone unless
there is sufficient evidence of a substantial
miscarriage of justice or prejudice or loss attributable
exclusively to the conduct of the arbitration.
The next point
canvassed by the appellant was the percentage holdings
of the parties in Karouchi Mining Co. Ltd. I must admit
I find myself unable to quarrel with the findings or
conclusions of the trial judge.
According to their
exhibit ‘C’ the respondents owned 75% of the shares and
the Djadeys 25% but admitted that what Karouchi owned,
they had to sell off some of the shares so as to comply
with the law to give 10% of the shares to the government
of Ghana.
This, according to the
evidence, was subtracted from the 75% and 25% held by
Karouchi and the Djadeys proportionately and they had
67.5% and 22.5% respectively for Karouchi and the
Djadeys and 10% for the Government.
As the learned judge
points out, there was nothing mathematically or
arithmetically wrong with the figures as found by the
arbitrators, and these must be confirmed.
Another bone of
contention is the Directors loan. The appellant’s case
is that the learned trial judge erred in holding that
the appellant admitted the Directors loan of ¢2.3
billion and therefore there was no need to prove it.
The financial statement
of the period ending on the 31st December 1995 stated
quite clearly that the Directors loan existed. The
evidence is that the applicants actually disputed the
loan, which existed before 1993. Indeed the Balance
Sheet as at the 31st December 1997 indicated how the
company was financed which included the Directors loan;
the repayment of which, under an agreement, was
subordinated to all other loans and creditors
outstanding at any one time.
This was before the
applicant’s acquisition of shares in the company
Paragraph 9 of the
arbitration agreement shows that the loan had been a
source of dispute since the appellants joined the
company and it was therefore referred to arbitration for
resolution.
As a matter of fact
many questions raised in connection with it would still
remained unanswered but for the evidence on record as to
what transpired at the Registrar General’s Department on
the 30th April 1996 in the presume of the applicant who
agreed that Karouchi Universal Company was wrongly
credited with the amount among other things. On the
evidence the existence of the loan is clear.
However, I think in the
interest of justice and for the sake of greater
certainty the arbitrators should have found not only the
extent of the Directors loan, but also how much if
anything each of the four named Directors (i.e. Fabian
Anim Dzadey Kwame Dzadey Jnr. Christopher Dewornu and
Wilford Darko was owed as at 30th June 1996
Item 2(f) of the
Arbitration Agreement required the arbitrators to
determine: Whether or not Bagudon Ltd. owed certain of
the Directors of Bugudon any sum of money by way of a
loan advanced to Bugudon which remains outstanding and
if so how much?
This particular award,
as it now stands, is likely to open the floodgates to
further litigation. Accordingly, it must be severed from
other issues and is hereby severable and set aside and
remitted to the Arbitrators. The Arbitrators are hereby
directed, without departing from their terms of
reference, to review the award in that connection so as
to avoid the possibility of relitigating the issue of
the Directors loan in terms of this Courts Ruling.
I now proceed to deal
with the final ground of appeal, that is Ground 7 which
states:
“The learned trial
judge’s conclusion that from the date the Appellants
agreed to finance Karouchi Mining Co. Ltd. the
subordinated loan ceased to be subordinated and could
attract interest is not supported by my principle of law
or the records before him”.
The evidence would seem
to suggest that it was an interest free loan advanced to
the company by the directors under an agreement by which
repayment was subordinated to all other loans and
creditors outstanding at any one time.
The arbitrators under
item (f) made an award as follows:
“We further award
interest amounting to ¢6,761,236,770. Interest
repayment starts from the inception of the takeover to
the time of commissioning the arbitration process i.e.
July 1996 – November 1999. This is to accommodate the
diminishing value arising from affluxion of time”
Bugudon Co. Ltd. and
Karouchi Universal Trading Co. Ltd. (the parties)
entered into a Joint Venture Agreement on the 19/9/1996.
The High Court took the view that the Director’s loan
was no more subordinated with effect from that date.
It must be noted that
by the provisions of the joint venture agreement, an
economic life line was given to Bugudon and the
Directors were relieved from having secure loans for the
running of the company.
On behalf of the
appellant it was submitted that as at the 30th June 1996
the loan was interest free and subordinated and nothing
changed its status thereafter. Therefore, the
arbitrators had no right to award interest thereon.
On behalf of the
Respondents it was submitted that it was within the
competence of the arbitrators, after considering all the
evidence adduced, to find that the loan ceased to be
subordinated when Karouchi Universal and Bugudon entered
into the Joint Venture agreement.
As a general rule an
interest on a loan becomes claimable in accordance with
the terms of the relevant loan agreement, or
alternatively when the principal amount remains
outstanding when it has become due and payable or from
the date the cause of action arises.
In instant case there
appears to be no agreement covering the issue. The
matter could have been sorted out at the time of the
joint venture agreement as to what was to become of the
status of the loan.
Sadly nothing was said
about it.
Be that as it may, it
seems to me that the loan could not have been granted or
subordinated in perpetuity. It could not have been
open-ended transaction – payable when able! At the time
of the joint venture agreement the parties must have
contemplated that the loan would be repaid since the
directors had by then ceased to have controlling
interest; nor did they remain the dominant force in the
company.
In the absence of any
evidence to the contrary, the loan must be deemed to
have become due and payable on the 19th September 1996
when the Joint Venture Agreement was entered into and
must carry interest from that date. To decide otherwise
in any view, would be harsh, unjust and inequitable.
There is abundance of
common law authority in support of the proposition that
“An arbitrator or Umpire has power to award interest on
the amount of any debt or damages for the whole or any
part of the period between the dates on which the cause
of action arose and the date of the award”
See for example London
Chatham and Dovan Railway Co. vs. South Eastern Railway
1893 A.C. page 429 and Ghana Commercial Bank vs. Bino
Okai 1982/83 GLR. 74 Royal Dutch Airline (KLM) vs.
Farmex Ltd 1989/92 GLR 623 as well as Adjei Vs. Amegbe
1989/90 1 GLR 351.
I would therefore vary
the date of the Arbitrators award of interest from the
30th June 1996 when Karouchi Universal first bought
shares in Bugudon to the 19th September 1996 when the
parties entered into the joint Venture Agreement.
Accordingly, the ruling of the High Court in this
respect is affirmed.
On the evidence as a
whole and in all the circumstances, the appeal is
dismissed subject to the variations and the remission to
the Arbitrators on the specific matters raised herein.
P.K. OWUSU-ANSAH
JUSTICE OF APPEAL
ESSILFIE-BONDZIE, JA:
I agree.
A. ESSILFIE-BONDZIE
JUSTICE OF APPEAL
ARYEETEY J.A:
I also agree.
B. T. ARYEETEY
JUSTICE OF APPEAL.
COUNSEL
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