IN THE HIGH COURT OF MALAWI
COMMERCIAL CAUSE NUMBER 13 OF 2011
AUCTION HOLDINGS LIMITED PLAINTIFF
FASTA CIVIL ENGINEERING DEFENDANT
CORAM: THE HONORABLE MR. JUSTICE L P CHIKOPA
Songea of Counsel for the Plaintiff
Nankhuni of Counsel for the Defendant
Njala/Banda, Court Clerk
by a written contract dated March 4, 2005 the parties agreed that the defendant erects a ‘tobacco selling floor’ [Sic] facility at Chinkhoma. As matters turned out the contract was terminated by the plaintiff in writing by letter dated February 16, 2006. The defendant was not overly impressed with such termination. The matter was thus taken for arbitration in terms of Clause 36 of the contract between the parties. Mr. Joseph Skinner Chimangafisi was appointed arbitrator by mutual consent. The arbitrator rendered his award. It was dated January 17, 2011. In paragraph 5.01 thereof the arbitrator found:
‘the Respondent shall pay the Claimant K27,354,441.38 [Twenty seven million fifty four thousands four hundred forty one kwacha and thirty eight tambala] in full and final settlement of all claims referred to me herein and in addition the Respondent shall pay compound interest at 24.5% per annum for every day that elapses from December 31, 2010 to the date of payment’. [Sic]
The defendant came to court and via Commercial Case Number 8 of 2011 sought to have the award registered and enforced. The plaintiff objected. It instead applied in the same action that the award be set aside for being improper. The court in the person of my Brother Mbendera J, SC decided that the challenge against the award could not properly be made in Commercial Case Number 8 of 2011. With the consent of both parties it was then agreed that subject to some variations being made in the award the same would be registered for enforcement as a judgment of this court. Its enforcement would however be stayed pending the determination of the plaintiff’s challenge against the award in this action. The sum in dispute, now reduced to K24,064,613.63 due to the variations/adjustments referred to hereinabove was paid into court on .
Under section 24(2) of the Arbitration Act[Cap 6:03 of the Laws of Malawi] this court has the mandate to set aside an arbitral award if in our view the Arbitrator misconducted himself or the proceedings, or if the Arbitrator/award has been improperly procured.
There is a similar power at common law. Thus an arbitral award maybe set aside if there is something radically and viciously wrong with the proceedings. This is clear from the cases, cited to us herein, namely Press Trust Limited v Littleways Building Contractors Limited Commercial Case Number 9 of 2007 Principal Registry [unreported] Celtel Malawi Limited v Star FM Radio Station Commercial Case Number 31 of 2011 Principal Registry [unreported]. There is also the English case of Haigh v Haigh (1861) 31 LJ Ch. 430. The conclusion is the same namely that an arbitral award will not be set aside unless there is something radically and viciously wrong with the proceedings/award. We should however be quick to emphasize certain of our sentiments vis a vis applications like the one before us. This is that this court does not in hearing an application to set aside an arbitral award sit as an appellate court. The Courts Act is clear about the hearing of appeals from subordinate courts. the High Court proceeds by way of rehearing. Such is not the case herein. The court only has to ask and answer the question whether or not there is something radically and viciously wrong with the award. If the answer be in the positive the award will be set aside. If not the award will be maintained. Secondly this court does not in hearing an application like the present one sit in place of the arbitrator. In other words this Court is not and cannot be the arbitrator. It must not therefore proceed as if it is the arbitrator. It only sits to test the award against the standards laid out in Haigh v Haigh, the Apex case and more importantly in section 24(2) of the Arbitration Act. Further we feel obliged to also point out that the power to set aside an arbitral award will not be exercised wily nilly. In Haigh v Haigh the court said:
‘I would observe that we must not be over-ready to set aside awards where the parties have agreed to abide by a decision of a tribunal of their own section’. [Sic]
This we want to believe is more so where the arbitrator is some expert in the area in which the parties are disputing. The Malawi Supreme Court of Appeal in Apex Operations Limited v World Food Programme MSCA Appeal Number 15 of 2001[unreported] cited with approval the sentiments of Banda J [as he then was] in Chikosa v Attorney General 11 MLR 454 at 457 namely that:
‘in my judgment this court must not be over-anxious to set aside an arbitrator’s award where the parties have their own choice, unless the court is satisfied that there has been something radically and viciously wrong in the proceedings. The test is whether the irregularity may have substantial miscarriage of justice’. [Sic]
In our judgment it is clear that the setting aside of an arbitrator’s award should be the exception rather than the norm. That an arbitral award should stand unless it is proved to be radically and viciously wrong or so irregular as to cause substantial miscarriage of justice. That in our judgment is also the purport of section 17 of the Arbitration Act which we, for other reasons quote hereunder.
From a different perspective we also find it important that we state two things. First that this remains a civil matter. He who alleges has the burden to prove their contention on a balance of probabilities. Secondly it is important that reference is made to section 17 of the Arbitration Act. This because it relates well to the court’s jurisdiction to set aside an arbitral award. The section provides:
‘unless a contrary intention is expressed therein, every arbitration agreement shall where such a provision is applicable to the reference be deemed to contain a provision that the award to be made by such Arbitrator or umpire shall be final and binding on the parties and the persons claiming under them respectively’.
Sometimes this provision is used to argue that an arbitral award is final and not subject to review by the courts. That is to argue in error. The above section must be read subject to section 24(2). But only to the extent that an award is final unless shown to the satisfaction of a court that it is radically or viciously wrong or in the alternative that it will cause substantial injustice.
THE PLAINTIFF’S CASE
The plaintiff according to its originating summons seeks to have the award set aside because the contract from which the award emanates is illegal and invalid for being contrary to statute and public policy and also because the arbitrator misconducted himself. The plaintiff alleges that the contract between the parties hereto dated March 4, 2005 is illegal, invalid and void ab initio in terms of section 20 of National Construction Industry Act Cap 53:05 of the Laws of Malawi and section 20 of the Engineers Act Cap 53:03 of the Laws of Malawi. And also that the arbitrator misconducted himself and the proceedings by (i) ignoring the plaintiff’s defence (ii) not determining several issues before him (iii) making inconsistent and ambiguous findings (iv) making an award to the defendant that is arbitrary and without justification and (v) making an interest award that is over the required interest rate. We will get to the exactitudes of the plaintiff’s case later in this judgment.
THE DEFENDANT’S CASE
There is a general disputation. We would rather though that we dealt with the defendant’s precise arguments as we deal with the issues herein.
A DISCUSSION OF THE ISSUES
We remind ourselves that this is a civil matter. The burden is on he who alleges to prove their allegation on a balance of probabilities. In the instant case the plaintiff is alleging that the award be set aside on grounds of illegality and misconduct. It is on the face it for the plaintiff to prove such allegation on a balance of probabilities. In deciding this matter we also remind ourselves that we are not sitting on appeal. That we are not therefore rehearing the referral to the arbitrator. Neither, we must emphasize, are we going to turn ourselves into the arbitrator. Our duty is to decide on the material before us whether the award is bad for being illegal or whether there was such misconduct by the arbitrator or of the proceedings as to make them so viciously and radically wrong as to cause substantial injustice or miscarriage of injustice. The two issues before us therefore are whether the award should be set aside on grounds of illegality or of misconduct.
The plaintiff’s argument is in two parts as we understand it. Firstly that the arbitrator never decided on the issue of illegality and secondly, and the foregoing notwithstanding, that the award should be set aside for being based on an illegal contract.
We have to understand and decide this matter in context. When the parties herein agreed on an arbitrator the arbitrator wrote them as to how the arbitration would proceed. The parties were asked to respectively submit their statement of claim and statement of defence complete with evidence. That in our view was to determine the issues in dispute between the parties. The arbitrator also made it clear that he would only make a determination on matters that were in issue and nothing else. It was to achieve this that in his letter of August 1, 2007 which was followed up by that of October 19, 2006 the arbitrator implored the parties to restrict their submissions to matters raised in the claim and defence and nothing else. In its statement of claim of November 22, 2006 the defendant claimed the sum of K42,848,781.48. This was from a total value of works done of K47556288.00 less the sum of K21268810.00 paid by the plaintiff to the defendant. The amount claimed by the defendant was broken down as follows:
i. Amount due for work done K26,287,478.00
ii. Loss of value compensation K2,944,197.51
iii. Interest thereon K11,617,106.22
iv. Retention K 2,000,000.00
The claim according to the defendant was for works done on site. There was attached to the statement of claim a schedule of the works done on site and their respective values. See PL7 of the affidavit of Pempho Likongwe of February 15, 2011. Thereafter the parties exchanged responses see PL 8 to PL12 in which each party sought to show why they were entitled to carry the day. At no point in our view was the small matter of the illegality of the contract between the parties hereto raised by the defendant indeed any party hereto. Can the arbitrator be accused of not having decided on whether or not the contract in issue was illegal? The answer is in the negative. It was not an issue before him. He was not made aware of it. He could not on the evidence before us have been aware of it. He therefore could not have been expected to decide on it. The plaintiff argues that they did raise this issue in their final submissions to the arbitrator which is PL13. That in accordance with David Taylor & Son Ltd v Barnett  1 ALL ER 841 the arbitrator should still have decided on illegality irrespective of the stage at which the issue of illegality was brought to the arbitrator’s attention. We have gone through exhibit PL13. By its own admission the plaintiff admits not having used the term illegality in its submissions before the arbitrator. They however think that the arbitrator should have inferred from the plaintiff’s mention of the two section 20s abovementioned that the plaintiff was talking about illegality. That is a giant leap of faith we think. As we have said above the arbitrator had already told the parties before him to raise the issues on which his decision was prayed for. Nowhere was the question of illegality raised. Not having raised the issue expressly did the plaintiff expect the arbitrator to bring it in by himself and by mere implication? After the issues had already been set out? He would in our judgment have run the risk of being accused of raising his own issues and deciding the dispute between the parties thereon. Of deciding the dispute by reference to matters not raised before him? Or of bringing to the dinner table items that were not on the menu? The mistake was the plaintiff’s. They neither pleaded nor at any one time expressly brought to the arbitrator’s attention the issue of illegality. They should not now be allowed to blame the arbitrator for not having decided one way or the other on this issue. In saying this we feel duty bound to point out that the facts herein are different from those in Barnett’s case. In that case the issue of illegality was actually brought to the attention of the arbitrator/umpire who, together with the other party to the arbitration, accepted that the contract was indeed illegal. That is not the case in the instant case. The alleged illegality was not brought to the attention of the arbitrator. Neither the defendant. Any which way you look at it the plaintiff’s argument that the arbitrator did not address his mind to the contract’s alleged illegality has no leg to stand on.
The next strand of the plaintiff’s argument is that having made the illegality argument in this court we should decide on it and in its favour. The argument is again in two parts: that the contract between the parties herein is illegal firstly for being in contravention of section 20 of the National Construction Industry Act [NCIA] and secondly section 20 of the Engineers Act.
Section 20 of the Engineers Act
The section provides as follows:
(1) Save where this Act otherwise provides, no person shall engage in the practice of engineering in Malawi, or hold himself out as being entitled so to do, unless he is registered under this Act;
(2) Any person who engages in the practice of engineering in contravention of subsection (1) shall not be entitled to recover in any court any charge or fee in respect of any engineering work or activity done or performed by him in the course of his said practice;
(3) No person other than a natural person may be registered under this Act.
The plaintiff alleges that the defendant put themselves out as engineers when they were not registered under the Engineers Act. This according to the plaintiff was done via the defendant’s utterances to the plaintiff’s former Group General Manager Dr Chipala and the defendant company’s profile which was submitted by the defendant together with the quotation for the construction of the tobacco selling floor facility at Chinkhoma the building in issue herein. It is important that the purport of the Engineers Act be understood. It does not say that one cannot be an engineer unless they are registered under the Engineers Act. It only says one cannot engage in the practice of engineering or hold themselves out as a practicing engineer unless they are registered under the Act. The reasoning is simple enough in our view. You become an engineer not because you are registered under the said Act but because you have the requisite academic qualifications. One can therefore be an engineer without being registered under the said Act. What one cannot be [even with the requisite academic papers!] unless registered under the Act is a registered engineer. What the said Act therefore proscribes is the practice of engineering or the holding out of oneself as such without first being registered under the Engineers Act. The question therefore is whether the defendant engaged in the practice of engineering or held themselves out as being entitled to so do. The answer is in the negative in both respects. Dr Chipala never testified to such effect. All we have is an allegation from Mr. Likongwe that the defendant held themselves out as registered engineers to Dr Chipala. At best that is hearsay evidence. We have also looked at the profile in issue. It clearly stated that the defendant was registered with the National Construction Industry Council[NCIC] and offered ‘construction and maintenance services in roads, bridges and building works’. It of course said it has engineers but clearly that was for purposes of the service it offered [as set out above] and not for purposes of carrying out the practice of engineering or holding itself out as being entitled so to do. More than that it is worth noting that the defendant company was careful to say it has engineers which is permissible if one has the requisite academic papers and not ‘Registered Engineer, Registered Graduate Engineer, Registered Technician Engineer or Registered Engineering Technician’ which is proscribed under the Engineers Act if one is not registered under that Act. As for the contention that the defendant did not in fact have an engineer or engineers on their books we think the plaintiff is catching at straws really. There was an exchange between the parties as to whether Mr. Msendema the defendant’s engineer was in fact an engineer. He produced a duly certified degree certificate from the University of Malawi showing that he did qualify in engineering from the said university’s Polytechnic College. That surely rested the matter of whether or not Msendema is an engineer. Whether or not he was registered is perhaps irrelevant for purposes of this case seeing as he never held himself out as a registered engineer or some such professional. There is in our view nothing on the basis of which we, even at this late stage, can conclude that the contract in issue herein was illegal for being in breach of section 20 of the Engineers Act. The defendant company never in the context of this matter held itself out as an engineering practice nor did it engage in the practice of engineering.
Section 20 of the NCIA
Subsection 1 provides that:
‘No person shall carry on business in the construction industry in Malawi unless he is registered under this Act’.
Subsection 2 on the other hand provides that:
‘No person being registered under this Act shall carry on business of a category in respect of which he is not registered’.
The plaintiff contends that the defendant company being registered as a building contractor in the K5,000,000.00 category could not have lawfully contracted to execute the Chinkhoma works because the works were for a different category namely the K50,000,000.00 category.
Our understanding is that you cannot carry on business in the construction industry unless you are registered under the NCIA. It is our further understanding that registration in the construction industry is in different categories and that even if registered one cannot carry on business in a category in respect of which he is not registered. The question being what are these categories across which one cannot flit without registration? The plaintiff, as we have indicated above, thinks these are provided for in the First Schedule which is to be found in the National Construction Industry[ Fees and Forms] Regulations Regulation 2 thereof made under section 29 of the NCIA with respect to building contractors. Accordingly building contractors are categorized, project value wise, beginning from K5,000,000.00 to the unlimited categories. The plaintiff contends that the defendant being a building contractor registered in the K5,000,000.00 category could not have lawfully contracted for work valued at more than K5,000,000.00. That any contract to such effect is void ab initio and therefore unenforceable. The plaintiff has fallen into error in our view. Our understanding of the NCIA is that ‘construction industry’ is the generic term for the business which NCIA seeks to regulate. Every person seeking to do business in the construction industry should, to use the words actually used in section 20 of the NCIA, be registered with NCIC. Such registration is provided for under National Construction Industry [Application Fees] Regulations Regulation 1 thereof complete with an application fee. It is obvious from the said Regulations that the construction industry is categorized. There are eighteen  such categories. See Regulation 2 of the immediately foregoing Regulations. The fees payable for each category are then set out in the First Schedule which is itself made under Regulation 2 above-mentioned. Whether or not one will be registered is in the discretion of the NCIC. See section 22 and 23 of the NCIA. The following will be taken into account before registration:
i. Capital and other functional resources;
ii. Whether one owns land, buildings and machinery;
iii. One’s managerial, professional, technical and other personnel;
iv. In the case of an individual one’s qualifications and skill;
v. Whether one has vehicles, plant, implements, tools, instruments, fuels and other goods and supplies for the unlimited categories; and
vi. Any other requirements which the Council may determine for each category necessary to enable him to discharge in a satisfactory manner, the obligations which may reasonably be expected of or undertaken by a person belonging to the category in respect of which registration is sought.
Depending on one’s application one will be registered to carry on business in the construction industry as inter alia a civil engineering contractor, building contractor, mechanical services contractor, borehole drilling contractor, a consulting architect, surveyor or engineer etc. It is clear in our judgment that the word category as used in section 20(2) of the NCIA therefore refers to the categories set out in the National Construction Industry[Application Fees] Regulations Regulation 2 thereof. Not to the classification based on the value of work for building contractors. To so interpret category as used in section 20 abovementioned would produce absurdities that could never have been in the contemplation of the legislature. Such an interpretation would proceed on the erroneous assumption that registration under the NCIA is restricted only to building contractors the categories of which are those set out in building contractors classification based on value of work. That cannot clearly be for what would we then term the rest of contractors, suppliers etc specified in Regulation 2 of the National Construction Industry(Application Fees) Regulations if not categories? Further it is clear that the word business as used in subsection 2 of section 20 of the NCIA refers to those numbered one to eighteen in the above Regulations one of which is of course that of a building contractor. It is clear therefore that when subsection 2 talks of categories it cannot be referring to the value of work classifications being spoken of by the plaintiff. Again it would suggest that the only class of business in the construction industry is that of a building contractor which is not the case. Much the same is the case with section 23(1) (e) and (f) of the NCIA. Categories as used in paragraph (e) refers to unlimited categories. Unlimited categories does not appear under the Regulations with respect only to building contractors. It also applies to civil engineering contractors and electrical contractors. It is obvious that it also refers to materials suppliers who are classified either as small scale or large scale suppliers. It is therefore clear to our mind that the word category as used in section 20 of the NCIA does not refer to classification of builders based on value of work as set out in the First Schedule. It refers to the categories set out in Regulation 2 of the National Construction Industry [Application Fees] Regulations. What therefore the NCIA proscribes i.e. makes unlawful is one flitting across such categories. Thus one registered as a building contractor cannot as well carry out business within the construction industry as an electrical or civil engineering contractor. The plaintiff’s contention that the contract between the parties herein is illegal for being business in the wrong category and therefore in breach of section 20(2) of the NCIA is untenable. But even if category as used in section 20 referred to building contractor’s classifications on the basis of project value (and it does not as we have concluded above) the contract between the parties herein would not be illegal as contended by the plaintiff. Or void ab initio. It would only be capable of sanctioning in terms of section 28 of the NCIA which provides that an offender is liable for two years imprisonment and a suitable fine if they contravene the provisions of the NCIA. The contract itself would however remain legal. It would have been illegal if the contractor were not registered in any of the eighteen categories referred to above. If the legislature had intended that the sanction be the nullity of the contract they would have inserted in the NCIA a provision similar to that found in the Engineers Act section 20(2)quoted hereinabove. That such a provision was not included means that it was not the intention of the legislature to punish noncompliance with nullity. But rather with imprisonment and/or a fine. Does this mean that the categorization/classification of building contractors in the First Schedule in respect of value of works is of no consequence? Not at all. we have above said that a disregard thereof may result in imprisonment/a fine. Further and speaking both generally and with specific reference to the instant case it should be noted that it is those wishing to construct in the instant case the plaintiff that ask for bids. Depending on the nature of the work at hand they will specify the kind of building contractor they want by specifying the class of contractor they want. Thus if the work requires a K50,000,000.00 category contractor the client will say so. In those circumstances it is difficult to envisage how a contractor can be awarded a contract if they are not eligible for due to category limitations. Unless of course the client decided to disregard their own award criteria in which case they will only have themselves to blame if things turn out bad. If however the contractor lies or misrepresents their way into a contract the result is not in our view that the contract will be illegal. Rather that the contractor can be sanctioned under section 28 above-mentioned or that the client can resort to contractual reliefs. In the instant case the plaintiff did not according to evidence state what class of contractor they were looking for. The defendant on the other hand indicated that they were registered with NCIC. That was true. If the plaintiff wanted to check out what class they would easily have done so like they eventually did and it would then have been up to them whether or not to award the contract to the defendant. As things are it is obvious that the plaintiff did not care that much for the kind of contractor they were engaging. Like the arbitrator opined it is obvious that they went into the contract without giving due regard to contractual niceties and hoped for the best. It never went that way. They only have themselves to blame. The contract between the parties herein is not illegal. It is however one that might attract sanction under section 28 of the NCIA.
We have above listed the alleged misconduct. We note that the affidavit and/or the submissions of which there were three versions sought in some instances to say more than was alleged in the summons. We will, as we decide on the issues, as much as possible stick to the allegations raised in the summons. Where necessary we will of course resort to the additives in the submissions and the affidavit as long as of course in so doing we do not go beyond the essence of the allegations.
Failure to Decide On the Main Issue
The plaintiff contended that the main issue before the arbitrator was whether or not the plaintiff had wrongfully determined the contract between the parties hereto. That issue the plaintiff contends the arbitrator did not determine. For that failure the plaintiff contended that the award should be set aside.
The defendant on the other hand dispute that the issue before the arbitrator was whether or not the contract had been terminated properly. They also contend that their claim was not premised on an alleged breach of contract. It was for the sum of K42,848,781.48 being the value of work done plus interest following the termination of the contract. The first question we need to ask is ‘what was the main issue herein?’ The second is whether or not the arbitrator decided on the main issue.
What Was The Main Issue Before The Arbitrator?
The plaintiff contends that the issue before the arbitrator was whether or not the contract had been properly terminated. The defendant thinks that the main issue was their money claim for work done as set out in exhibit PL7 page 2.
The starting point in our view has to be the documentation which the parties put before the arbitrator and the evidence in respect thereof. The basis of the defendant’s claim is PL7 which is the statement of claim they placed before the arbitrator. The opening words were that the defendant was writing to ‘stipulate our claims in addition to the main dispute that our contract with AHL was not terminated in accordance with the Contract Agreement. This contract was determined erroneously, Auction Holdings breached the contract’. The defendant then went on to claim the sums hereinbefore mentioned for value of work done. The letter terminating the contract on the other hand alleged that the defendant failed to finish the contract within the stipulated time, that the defendant used substandard material and workmanship, and that the defendant put up an unsafe structure and finally that the defendant failed to proceed diligently and regularly. In our view two issues were raised before the arbitrator. Firstly the propriety of the termination and secondly the value of works done claim issue.
Did The Arbitrator Decide On These Issues?
Propriety of the Contract’s Termination
It appears to us that when the plaintiff alleges that the arbitrator did not decide on the propriety of the termination it is actually saying that the arbitrator did not decide one way or the other on the four grounds raised in exhibit PL3 on the basis of which the contract was terminated. We consider each one of them separately.
Failure to Complete Contract on Time
Either the plaintiff wanted the arbitrator to find for them or in a particular fashion. Otherwise we have to agree with the defendant that the arbitrator did make a finding about the time within which the contract was to be completed. The totality of his finding was that it was unrealistic to have expected the contract to be completed in the time it was contracted for i.e. 28 days. This because of the way the project was structured. There were no proper architectural drawings as a result of which changes were being made to the structure and design of the building as the project progressed. He also found that at the time the contract was being terminated i.e. February 16, 2006 it had been practically complete from June 27, 2005. This is clear from reading paragraphs 2.07 and 3.06 of the arbitral award. The arbitrator was saying it was not too clever for the plaintiff to in February 2006 terminate the contract for failure to complete the same within four weeks when the structure was practically finished in June 2005 and when any extensions of time were necessitated by the constant changes to the structure for which the plaintiff was as liable as the defendant. Unless the plaintiff wanted the arbitrator to make the finding in a specific fashion or in his favor we fail to agree that the arbitrator did not make a finding/decision on whether the defendant failed to complete the contract within the agreed time.
Use of Substandard Materials and Substandard Workmanship
Again we fail to agree that the arbitrator did not make a finding on this issue. In paragraphs 2.05, 2.06. 2.27 and 2.49 of the award it is clear that the arbitrator put the blame for use of substandard materials largely on the plaintiff. This was because the structure was being put up subject to the direct supervision and direction of the Supervising Officer/Quantity Surveyor Mr. Cardew. See Clause 1 of the conditions of the contract that provided:
‘the contractor shall upon and subject to these Conditions carry out and complete the Works shown in the Contract Drawings and described by or referred to in the Contract Bills and in these Conditions in every respect to the reasonable satisfaction of the Architect/Supervisor’.
Further and more than that the arbitrator found that the contractor i.e. the defendant did the works in accordance with the sketch the basis of the works except for the purlins. It is clear that the arbitrator concluded that the defendant could not be accused of using substandard materials or workmanship without at the same time attaching liability in the same respect to the plaintiff who was through Mr. Cardew present during the purchase and use of materials.
Safety Of The Structure
The plaintiff alleged that the arbitrator did not decide whether or not the structure was safe for use. This in our view is to forget the content of paragraph 2.49 of the award. In it and as we have said above the arbitrator found that save for certain defects in respect of which blame was to be shared between the parties the structure was constructed in accordance with the design shown on the contract drawings [i.e. the sketch] save for the purlins. The defective purlins were the responsibility of both parties and he opined that they both be responsible for rectifying the defect thereby occasioned. See paragraph 3.07 of the award.
Regularity And Diligence
The plaintiff alleged that the defendant failed to proceed regularly and diligently on the contract. They then alleged that the arbitrator failed to decide whether this was such or not. The plaintiff is again catching at straws. Given the findings the arbitrator made about the conceptualization and execution of the contract it is idle we think to allege that the defendant failed to proceed with regularity and diligence. There were no architectural drawings for the project. There were therefore no detailed bills of quantities. The supervisor/architect was unsuitable. There was therefore no proper supervision. The structure was however generally found to have been compliant with the sketch. It cannot be said that there was a lack of diligence and regularity.
Failure To Remedy Defects
This contention was withdrawn by the plaintiff. The defects were the responsibility of both parties and the cost of remedying them was shared between the parties. The award was reduced to reflect such sharing. We say no more thereon.
Value Of Work Done And Interest
Again the question is whether or not the arbitrator decided on the defendant’s claim. As we have shown above the defendant’s claim was in two parts. First the propriety of the termination and secondly the value for work claim. It is clear that the arbitrator decided on both. One only has to go to paragraph 5.01 of the award. It is quite a different thing that the plaintiff disagrees with the decision or that the arbitrator did not find for the plaintiff or that he found for the defendant.
Ignoring Issues In The Plaintiff’s Defence
The plaintiff alleged that they raised issues in defence which the arbitrator ‘completely ignored’. We feel obliged to ask the question what exactly is the defendant’s argument? Is it that the arbitrator took no notice of what the plaintiff said in defense during the arbitration? Is it in the alternative that the arbitrator took notice but disagreed with them or found against them? In our considered judgment it is an issue if the arbitrator took no notice or completely disregarded the plaintiff’s arguments for in doing so the arbitrator effectively denied the plaintiff the right to a hearing. It is not, in the context of this part of our judgment an issue if all the arbitrator did was disagree with the defendant for it within the arbitrator’s remit to disagree. Disagreement only becomes an issue if the arbitrator disagreed for no proper reason or in travesty. That is a matter we consider later herein. For now let us consider whether as the plaintiff alleges the arbitrator ignored issues raised in the plaintiff’s defence.
The Changed Purlins
One of the reasons advanced for terminating the contract was bad workmanship and the use of substandard materials. This, it is further contended, was as a result of the plaintiff unilaterally changing the specifications of the purlins used on the structure. The arbitrator found that any changes to materials including the purlins was the act of the both parties hereto. In other words it refused to blame the defendant to the exclusion of the plaintiff. He instead blamed both parties. The plaintiff thinks this conclusion was arrived at without reference to the evidence put before him. That had he done so he would have concluded that the change of the purlins was purely the work of the defendant. The plaintiff cannot be serious. Unless of course they have not read the award itself. In the alternative unless they are unable to differentiate between ignoring an issue and making a finding against one’s position. The issue of the steel purlins is discussed in paragraphs 2.25, 2.26, 2.27, 2.31, 2.32 and 2.33. In those paragraphs the arbitrator laid the case for each party. He also set out his conclusions basing from each party’s submissions. It cannot be true therefore that the arbitrator ignored the plaintiff’s arguments in defence. What is true is that the arbitrator disagreed with the plaintiff’s view that the change to the purlins used and therefore the shoddy work was the defendant’s fault. Was that by itself wrong? We answer in the negative. Like we have said above there is nothing to stop the arbitrator indeed any tribunal from disagreeing with a party’s viewpoint. The plaintiff cannot be heard therefore to say that their viewpoint was ignored merely because the arbitrator disagreed with them. There is therefore no basis for contending that the plaintiff’s position that the defendant was responsible for the changed purlins was completely ignored.
Value Of Work Done
The defendants claimed that the value of the work done was K47556288.00 and attached what the plaintiff called a strange bill of quantities in support thereof. The arbitrator found for the defendant in the sum of K27354441.38 from which was later deducted the costs of remedying the defects on the project. The plaintiff disputed the amounts and now allege that the arbitrator ignored their defence in respect of the above sums. If by that the defendant means the arbitrator took no notice of their defence then they are being less than forthright. If they however mean that the arbitrator disagreed with them our immediate response is he, like all tribunals, was entitled so to do provided there were good reasons for so doing. It is now up to the plaintiff to show that the arbitrator’s coming to the decision was so much without basis as to amount to a viciously and radically wrong decision. The truth of the matter is that the arbitrator did not ignore the plaintiff’s defence. He took it into consideration. Just that he disagreed with it. And if you ask us it was for good reason. Whereas the defendant brought detailed support for the claim to justify the work done and the cost thereof and had a Mr. Gondwe, a Quantity Surveying Technician, and the defendant’s Managing Director as witnesses the plaintiff was content to use Mr. Likongwe a lawyer as their witness. Not only is he with respect barely out of the kindergarten in matters in issue herein it is clear that his evidence was hearsay. If we may why did the defendant not use Mr. Cardew who, despite his obvious limitations, had some technical ability and firsthand knowledge of the matters in issue herein. Yet again we do not agree that the arbitrator completely ignored the plaintiff’s arguments on the value of work done issue. He only disagreed with them and that he was entitled to do.
Did The Arbitrator Ignore The Plaintiff’s Assertion That The Defendant Put Up A Substandard Structure?
Again the answer is in the negative. Yet again the plaintiff confuses ignoring their defence and a decision against them. As we have shown above the arbitrator made a finding that the structure was substantially in accordance with the drawings. That conclusion was arrived at after a consideration of both party’s positions. That was aside from the issue of the changed purlins which the arbitrator found was a matter for which both parties were responsible.
We have dealt with this matter in substantive fashion above. If the plaintiff’s argument is that it was ignored we will respond by saying their argument is untenable. This is an issue on which the arbitrator could not have made any pronouncement. The issue was simply not put before the arbitrator. It is preposterous therefore to expect him to have made any decision thereon. This in our judgment is not a matter of the arbitrator ignoring the issue but of not being called upon to make any pronouncement thereon. The plaintiff alleges that they raised the issue in the submissions. That cannot be true. In its own written submissions before this court the plaintiff admitted that it never specifically or expressly alleged illegality. It only made certain noises from which it expected the arbitrator to infer and conclude illegality. It is an untenable proposition. Not having raised the issue of illegality the plaintiff cannot now be allowed to turn around and accuse the arbitrator of ignoring a nonexistent defence/issue.
Adequacy Of Consideration
The plaintiff’s point is that this is a fixed price contract. That had the arbitrator not ignored that fact he would have found that the defendant was not owed any more money by the plaintiff under the contract. The arbitrator did not ignore the plaintiff’s defence. He considered the evidence before him and found that this was not a fixed price contract. He found that the works were, due to the fashion in which the contract was structured, capable of variation. Similarly therefore the cost of the contract and the exact amount owing to the plaintiff were, subject to audit and remeasurement, capable of change. See also Clause 2 of the agreement which clearly provided that the plaintiff would pay the defendant the sum of K19,753,750.00 [the contract sum] or such other sum as shall become payable hereunder at the times and in the manner specified in the said Conditions[our emphasis]. Clearly the contract envisaged that the contract sum was only the starting point and that other sums could become payable under the said contract. The plaintiff’s argument in this regard falls by the wayside.
That The Award Had No Legal Or Evidential Basis
Going by paragraph 4.1.3 paragraph two of its submissions the plaintiff took issues with the award of K27,354,441.38, interest and the arbitrator’s fees/costs. It thinks the figures are erroneous. It also feels there is no legal or evidential basis for the award. On the latter the plaintiff contends that since the main issue was whether or not the contract had been wrongfully terminated and since that question was not determined the arbitrator had no business awarding the defendant anything. There was no wrongdoing on the part of the plaintiff on which to hang such award. The plaintiff has got it wrong. To begin with the propriety of the termination is not the only issue indeed the main issue. There was also before the arbitrator the small matter of value of work done. Secondly, we have no doubt in our mind that the basis of the award is not the perceived wrongful termination of the contract. It is the value of work done. The contention that there was no basis for making the award cannot therefore stand. This was a claim based on the procedure to be followed following the termination of the contract under Clause 26 especially paragraphs 3(d) and 4 thereof. As to the figures themselves we respond as follows:
The K27354441.38 Award
First it should be noted and we have also said this above there was supposed to be deducted from this sum a sum representing the defandant’s responsibility towards the normalization of defects. This was done with the consent of both parties and should not therefore busy us. The plaintiff says there was no basis for this award. The defendant has for some reason forgotten exhibit PL7 and paragraph 2.15 of the award. Therein lies the defendant’s claim. The total sum claimed came to K42848781.48. The arbitrator in due exercise of his discretion decided that of the amount claimed he would award the sum of K27354441.38. The plaintiff says it would have been better if the arbitrator had set out or broken down such sums so that he should know what was awarded for what. Maybe and we would admit that that would be better. But we should not forget that the arbitrator is not ordinary arbitrator. He is also a professional in the very matters under dispute. He heard evidence from both sides on all relevant issue. He even went to the site. Thereafter he made his award which is a substantial reduction of the total sum claimed. Can such conduct be said to be so radically or viciously wrong as to justify a setting aside of the award? We do not think so. We would like to observe that there is no uniform way of writing an award in much the same way that there is no uniform way of writing a judgment. It would therefore be perverse if a judgment or an award were to be set aside merely because it does not accord with certain preferred stylistics or esthetical tastes. We would have been willing to find the award radically or viciously wrong if evidence was proffered that the works done and the other heads could not have justified an award such as was made herein. But as we have shown above the plaintiff was content to bring in the evidence of Mr. Likongwe which is hearsay while the defendant brought in that of the defendant company’s Managing Director and Mr. Gondwe a Quantity Surveying Technician. We are not unaware that there were reports submitted about the structure by the Director of Buildings, Malawi Government, RD Consultants and Romana Consultants. It is clear from where we stand however that such reports were in the main on defects and not value of works done. The issue of defects was decided already with the consent of both parties. They agreed they were equally liable and the sum spent on correcting such defects was contributed in equal share by the said parties. There were also issues of competence and impartiality raised about the consultants. These were not substantially disputed by the plaintiffs.
There is need to understand the matter of interest properly. Section 21 the Act does not proscribe an award from carrying interest. It only says it will not carry interest unless it is so ordered by the arbitrator. Where the interest is not ordered by the arbitrator it will nevertheless carry interest as from the date of the award and at the same rate as a judgment debt. The arbitrator herein awarded the sum of K27354441.38. He also ordered that interest be payable thereon from December 31, 2010 at 24.5% per annum. Was the award allowed by law to carry interest? The answer has to be in the positive. Section 21 above-mentioned leaves us in no doubt whatsoever on that score. The next question is whether the award should be allowed to carry interest from December 31, 2010 allowing for the fact that the sum awarded already included interest. We do not think so. That would result in a possible double payment of interest. We agree therefore that the operative date for calculating interest on the award should be January 17, 2011 the date it bears. We also agree that the rate of interest should be that applicable for judgment debts. Should the fact of changing the operative date and the rate of interest make the award so radically and viciously wrong or so substantially unjust as to warrant its setting aside? We do not think so. These are matters capable of being cured just as the amount in respect of the defects was cured.
The summons does not raise the issue of fees and costs. Technically we would be within our rights if we did not debate this issue. We will say our tuppence’s worth about it all the same. Not because we are not unaware that we should not or that we pay scant regard to the rules of procedure but because we find it a point that though not necessarily on the agenda herein is one that may provide useful obiter. And this is that if a party is unhappy with fees the way forward is not to move for a setting aside of the award itself but to ask for a taxation of the costs/fees. Secondly we wish to say that it appears to us that unless there is a contrary intention costs/fees are borne by the unsuccessful party in this case the plaintiff. See section 19 of the Act. The plaintiff argued that it had been agreed that the costs/fees would be paid and were paid in advance by the defendant. Such seems to have been the agreement indeed. But if we go to the letter from the arbitrator setting out the process of the arbitration costs and fees were to be paid by the losing party. Both parties agreed to such manner of proceeding and proceeded accordingly. The second agreement naturally superseded the earlier one. The plaintiff cannot now turn around and plead the earlier agreement when there is a latter one.
Allegations Of Bias
The plaintiff raised all those issues which it alleged the arbitrator ignored and argued that because the arbitrator found against it then he was biased. We have dealt with these matter hereinbefore. A mere finding against one party is not equal to bias. Why because an arbitrator is entitled to find against one or the other party on any issue before him. That is the essence of his function. He cannot therefore be faulted for doing his job. For a case of bias to be made out there has to be more. The party alleging it has to show that the arbitrator went beyond making a finding against them. That in doing so they were driven by considerations other than the evidence before them. An example would be an arbitrator finding in the face of clear evidence pointing towards one conclusion against a party merely because of consanguinity. That has not been alleged herein. We cannot even therefore talk of it having been proved on a balance of probabilities.
Is The Award Inconsistent And/or Ambiguous?
It is one thing to allege. It is quite another to set out and prove such allegations. In paragraph 4.1.5 set out what he considers are inconsistencies and ambiguities. First that the arbitrator did not set out the issues and the nonissues. It cannot be true in our view. The arbitrator set the alleged wrongful termination and the value for work claims and made finding thereon. Secondly the plaintiff alleges that the claim being based on an alleged wrongful termination of contract and the arbitrator having made no finding thereon the award should not stand for allegedly being inconsistent and ambiguous. We are not sure wherein lies the inconsistency and/or ambiguity. We have shown that the termination of the contract was not the only issue. Also that that notwithstanding a finding was made thereon. But more importantly we have shown that the award was not based on the wrongful termination of the contract. It was based on the value for work claim. Thirdly the plaintiff says it was baffling that the plaintiff was found liable despite the arbitrator finding that the defendant was contracted to put up not a makeshift shed but some auction floor. The plaintiff keeps bringing this argument in different shapes. The defendant’s claim was based on value for work done. Not the wrongful termination of the contract. It is also a tad simplistic to allege that the defendant’s claim was premised on the claim that they had been contracted to put up a makeshift shed. Then there is the small matter of the K7879655.47. Firstly the plaintiff makes a mountain out of the fact that the arbitrator did not mention it in the award. It was clearly an oversight which was resolved by the parties in Civil Cause Number 8 of 2011. We need not spend further time on it. All in all the claim for inconsistency and ambiguity is not made out.
An arbitral award is meant to be final. The court may however set it aside if there is something viciously or radically wrong with the award. Or that it will cause substantial injustice. The burden as in all civil matters is on the applicant to show on a balance of probabilities that the award is indeed viciously or radically wrong or that it will cause substantial injustice. In exercising the power to set aside an arbitral award the courts will move with caution. The thinking is that if the parties have agreed on a manner of sorting out their issues they should be allowed to do so unless the solution is untenable. In the instant case the plaintiff alleged illegality. We found none. They also alleged misconduct of both the arbitration and the arbitrator. We went allegation by allegation and we found no such misconduct. What we faulted the arbitrator for was the operative date of the interests and the rate thereof. That is a fault that can be corrected and does not in our humble judgment make the award viciously and radically wrong. Or one that will cause substantial injustice. The same was done in respect of the money in respect of the defects. It was agreed that half of the K7879655.47 should be deducted from the award. Accordingly we dismiss the application to set aside the award. We will however and in accordance with our findings above order that the operative date for the calculation of interests be January 17, 2011 the date of the award. The rate and calculation will be as applicable for judgment debts. The money paid into court will therefore be paid out to the defendant’s Counsel forthwith. Interest will be calculated and payable thereon starting from January 17, 2011 to the date the payment into court was made in the manner ordered above.
The defendant has successfully resisted the plaintiff’s claim. He shall therefore have the costs of this matter.
Dated this December 1, 2011 at Lilongwe.
L P Chikopa