Champ Health Solutions v ER 24 EMS (PTY) Ltd and Anor (Appeal 89 of 2015) [2019] ZMSC 305 (26 March 2019)

J1 IN THE SUPREME COURT OF ZAMBIA HOLDEN AT KABWE (Civil Jurisdiction) APPEAL NO.89/2015 BETWEEN: CHAMP HEALTH SOLUTIONS AND ER 24 EMS (PTY) LIMITED MOPANI COPPER MINES PLC 1st RESPONDENT 2nd RESPONDENT Coram: Chibomba, Muyovwe and Hamaundu, JJS On 12th August, 2015 and 26th March, 2019 For the appellant : Mr J. Madaika, Messrs J and M Advocates For the 1st Respondent : Mr N. Nchito, S. C., and Mrs S. Kateka, Messrs Nchito and Nchito For the 2nd Respondent: Mr S. L. Chisulo, S. C., Messrs Sam Chisulo W and Company JUDGMENT HAMAUNDU, JS, delivered the judgment of the Court. Cases referred to: 1. Lumus Agricultural Services Limited, Lumus Agricultural Services Company (Z) Limited v Gwembe Valley Development Company Limited (In Receivership) (1999) ZR 1 2. Leopold Walford (Zambia) Limited v Unifreight (1985) ZR 203 I J 2 3. Townap Textiles Zambia Ltd and Chhaganlal Distributors Ltd v Tata Zambia Ltd (1988-1989) ZR 93 Legislation referred to: 1. The Companies Act, Chapter 88 of the Laws of Zambia 2. Authentication of Documents Act, Chapter 75 of the Laws of Zambia, S.3 Rules referred to: 1. The High Court Rules, Chapter 27 of the Laws of Zambia 2. Arbitration (Court Proceedings) Rules, Statutory Instrument No. 75 of 3. The Rules of the Supreme Court (White Book) This appeal is against a ruling of the High Court by which the appellant’s action against the two respondents was dismissed on preliminary points. A brief background to this appeal is this: On 26th June, 2013 the 1st respondent and a company known as Champ Holdings Ltd signed an agreement called “Memorandum of Agreement”. This was followed by another agreement called the “Services Agreement” which was signed by parties known as CHAMP and ER 24 on 11th April, 2014. The “Memorandum of Agreement” in particular provided for a dispute resolution mechanism. A dispute arose between the parties in 2014 which led the appellant to sue the two respondents in 2015. In the course of J3 interlocutory proceedings, the 1st respondent raised the following preliminary issues: (i) whether the appellant could effect service on the 1st respondent which is a company registered in the Republic of South Africa without first obtaining leave to serve process outside jurisdiction in terms of the provisions of Order 10 Rule 16 of the High Court Rules, Chapter 27 of the Laws of Zambia: (ii) whether the appellant could properly rely on an unauthenticated document, namely the ‘Memorandum of Agreement’ exhibited as OMI in the affidavit in support of the appellant’s application for interim injunction as the basis for its claim in terms of the decision in Lumus Agricultural Services Limited, Lumus Agricultural Services Company (Z) Limited v Gwembe Valley Development Company Limited (In Receivership))1); and: (iii) whether the appellant had locus standi in this matter considering that the Memorandum of Agreement exhibited by the plaintiff as OMI in the affidavit was entered into by Champ Holdings Limited and the further agreement exhibited as OM2 in the affidavit was entered into by Champ Health Solutions, both of which are not the appellant. The court below considered those points of objection and rendered decisions on them. On the issue of service, the court noted that the 1st respondent's registered office was in the Republic of South Africa and that therefore, by the provisions of Order X rule 16 of the High Court J4 Rules, the appellant was required to apply for leave of the court to issue originating process outside the jurisdiction. The court dismissed the appellant’s argument that service was effected on the 1st respondent at the premises of the 2nd respondent in Kitwe, saying that there was no proof that the 1st defendant had an authorized agent in Kitwe; and that in any case, Section 200(1) of the Companies Act, Chapter 388 of the Laws of Zambia provides that a document may be served on a company by leaving it at the registered office. The court held that there was no proper service of the originating process on the 1st respondent. The court, however, held that on the authority of the case of Leopold Walford (Zambia) Limited v Unifreight(2), this was a curable defect if the appellant could demonstrate that it had locus standi to sue. On the issue of authentication of the “Memorandum of Agreement”, the court noted that the document itself stated that it was signed at Paulshoff in the Republic of South Africa. According to the court, the agreement was caught up by the provisions of Section 3 of the Authentication of Documents Act, Chapter 75 of the Laws of Zambia. The court said that since the agreement was not J 5 authenticated as provided for by Section 3, it could not be used in this country for any purpose at all. On the issue of locus standi, the court noted that the appellant in this case is Champs Health Solutions Limited, a separate legal entity, while the agreement was signed by Champ Holdings Limited, a different and distinct legal entity. The court dismissed the appellant’s argument that Champ Holding Limited had ceded its rights and obligations under the agreement to the appellant, saying that the appellant had not pleaded that fact either in its pleadings or in the affidavit in support of the application for an injunction; and that neither the memorandum of agreement nor the subsequent service agreement contained anything to support that assertion by the appellant. The court, therefore, found that the appellant was not a party to the agreement. Having resolved those three points, the court then said that there was an even bigger challenge to the appellant’s suit. The court noted that the memorandum of agreement contained a clause which showed that the parties had chosen arbitration as their mode of dispute resolution. The court then said that if the appellant was only coming to court in order to seek interim relief by way of an injunction, J 6 it did not follow the right mode of application provided under the Arbitration (Court Proceedings) Rules, Statutory Instrument No. 75 of 2001. In conclusion, the court found that the combination of the defects in this case, when added up, were fatal to the appellant’s case. Consequently, the court dismissed the appellant’s action. The appellant appeals on six grounds of appeal as follows: “ 1. The learned puisne judge erred in law and fact when he held that this is a proper case to dismiss the entire action under cause number 2014/HPC/0442: 2. The learned puisne judge misdirected himself when he held that the plaintiff had no locus standi in the matter despite the evidence on record clearly demonstrating such locus standi: 3. The learned puisne judge misdirected himself and made a perverse finding of fact that the document marked “OMI” was signed entirely in Paulshof when the disputed affidavit evidence on record shows that the document was signed by the appellant in Lusaka, Zambia, and by the 1st respondent in Paulshoff, South Africa: 4. The learned trial judge erred in law and fact when he glossed over and failed to determine the question as to whether the provisions of the Authentication of Documents Act, Chapter 75 of the Laws of Zambia apply with respect to a contract executed by one party in Zambia and the other party in South Africa: 5. The learned puisne judge erred in both law and fact when J 7 he raised the issue of the arbitration clause ex proprio motu and failed to avail the parties an opportunity to be heard on this issue before deciding it on his own motion: and, 6. The learned puisne judge misdirected himself when he held that the existence of an arbitration clause is a ground for dismissing a matter under the provisions of Order 14A RSC, 1999 Edition (White Book) Volume 1 and that the action was in contravention of the Arbitration (Court Proceedings) Rules, Statutory Instrument No. 75 of 2001” We shall deal with the issue of arbitration first. Consequently, we will deal with the fifth and sixth grounds of appeal together. On behalf of the appellant, learned counsel submitted that while, under Order 14A of the Rules of the Supreme Court (White Book), a judge on his own motion could raise an issue, he was required to give the parties an opportunity to be heard on the issue. In this case, counsel faulted the court for having made a decision on the existence of the arbitration clause when it had not given the parties an opportunity to be heard on it. Learned counsel went on to submit that the existence of an arbitration clause does not preclude a party from commencing an action in the High Court. According to counsel, a party is at liberty to proceed by way of an action in court, notwithstanding the J 8 existence of an arbitration clause, if such party feels that arbitration would serve no useful purpose. For that submission, we were referred to the case of Townap Textiles Zambia Ltd and Chhaganlal Distributors Ltd v Tata Zambia Ltd(3). Given the period when this decision was made, that is in 1988/1989, it is the repealed Arbitration Act, Chapter 40 of the Laws of Zambia which was being considered in that case. Counsel, however, also referred us to Section 10 of the Arbitration Act No. 19 of 2000, as well as Rule 4 of the Arbitration (Court Proceedings) Rules 2001, Statutory Instrument No. 75 of 2001, which are currently in force. Then counsel argued that the court below should have first considered whether the matter was one fit for arbitration; and, if so, the court should have stayed the court proceedings, and not dismissed the action. The respondents countered the appellant’s argument through a single argument; namely, that it is clear from the ruling of the court that it did not dismiss the action on the basis of the existence of the arbitration clause. We must say that it is clear to us that the court below was labouring under the impression that once there is an arbitration J9 clause in an agreement, the parties must subject their disputes to arbitration. That is why the court said that if the intention of the appellant was to come to court to seek interim relief by way of an injunction, the appellant had adopted the wrong mode of seeking such relief. We would like to clear that misconception. Section 6(1) of the Arbitration Act, No. 19 of 2000 provides: “Subject to subsections (2) and (3), any dispute which the parties have agreed to submit to arbitration MAY be determined by arbitration” (emphasis ours). Section 10(1) of the same Act provides: “A court before which legal proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so requests at any stage of the proceedings and notwithstanding any written law, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed” (underlining ours for emphasis). Rule 4 of the Arbitration (Court Proceedings) Rules, 2001 S. I. No. 75 of 2001 on the other hand prescribes the practice to be adopted in applications for stay of proceedings. In the case of the High Court, the rule provides that the application shall be made by J 10 summons accompanied by affidavit before the Registrar (Deputy Registrar) or a judge, if the proceedings are pending before the judge. What this means is that when a party commences an action in the High Court, those proceedings are competently before that court, even if an agreement which is the subject of that action provides for resolution by arbitration. Unless a party applies for a stay of proceedings and reference to arbitration, which must be made by summons, the court does not have the liberty on its own motion to refer the matter to arbitration. We thus do not agree even with the contention by the appellant that the court should have asked the parties to be heard on the issue: the court did not have jurisdiction to raise the issue on its own motion, at all. We will now deal with the questions that were before the court below. The fact that the 1st respondent is based outside the jurisdiction is not in dispute. Not in dispute also is the requirement that a party must apply for leave to the court to serve any originating process out of the jurisdiction. The only contention that the appellant put forward was that it served the originating process on the 1st respondent at the 2nd respondent’s premises here in Zambia; presumably where the J11 joint exercise was said to be carried out. In Zambia, service of documents on a limited company is prescribed by Section 200(1) of the Companies Act, Chapter 88 of the Laws of Zambia which provides that service shall be by leaving the document at the registered office or by posting it to the registered postal address or by personal service on a director or secretary. Order 10/1/21 of the Rules of the Supreme Court (White Book) also provides that service on a limited company in England is governed by the English Companies Act. The provision is similar to ours. In this case, the court below dismissed the appellant’s contention on the ground that it had not been established that the 1st respondent, though being domiciled outside the jurisdiction, was carrying on business at Mufulira through an agent as provided by Order X rule 14 of the High Court Rules. The court below was on firm ground on that score. The only issue, therefore, is whether that omission by the appellant would render its action liable to dismissal. In Leopold Walford (Z) Limited v Unifreight’31 where a plaintiff issued a writ intended to be served out of jurisdiction before obtaining leave of the court, we held that breach of a regulatory rule, such as this one, is not always fatal because much depends upon the J 12 nature of the breach and the stage the proceedings have reached; and that, consequently, breach of a regulatory rule is, as a general rule, curable. In that case, since the plaintiff had also applied for amendment of the writ of summons, we allowed the plaintiff to amend the writ and then obtain leave of the court to serve the amended writ of summon outside the jurisdiction. In this case, the proceedings are just at the beginning. In fact, the defendants have not even filed their defences yet. This is therefore a case where the appellant can apply for leave and serve the writ of summons afresh. In our view, this breach should not have resulted in the dismissal of the appellant’s action. The second question should not even have been raised. In raising that question, the respondents relied on the case of Lumus Agricultural Service Co. Ltd & Another v Gwembe Valley Development Ltd(In Receivership)'11. The court also relied on the same case in arriving at its decision. Both the appellant and the court overlooked one of our holdings in that case. The holding states: “(ii) An instrument which is not authenticated is valid between the parties and ineffective against third parties”. J 13 The 1st respondent which raised the question is a signatory to the memorandum of agreement by reason whereof it is a party thereto. The 1st respondent is, therefore, estopped from raising the question of authentication of that agreement. The third question raised the issue whether the appellant is the correct party to this action. Order 15/6/3 of the Rules of the Supreme Court (White Book) permits the addition or substitution of a plaintiff. Both Order XVIII of our High Court Rules, Chapter 27 of the Laws of Zambia and Order 20 of the Rules of the Supreme Court (White Book) permit the amendment of pleadings; particularly, the averments therein. In this case, the court below rejected the appellant’s contention that Champ Holdings Limited ceded its rights under the agreement to the appellant. There were two or three options available to the appellant: One was to add Champ Holdings Limited to the action. The other was to substitute Champ Holdings Limited for the appellant. Yet another option was for the appellant to amend its pleadings in order to include averments that traversed the ceding of Champ Holdings Limited’s rights to the appellant. In short, this was not a defect that was incurable. J 14 In conclusion, we hold that, contrary to the lower court’s view, there was no defect, or a combination of defects, that was fatal to the appellant’s action. We, therefore, find merit in this appeal. We order that the appellant do choose what amendment it seeks to make and apply for it. Thereafter, the appellant should apply for leave to serve the amended originating process outside the jurisdiction. As for costs, we acknowledge that costs generally follow the event. However, in this case we do note that indeed there were some defects which prompted the respondents to raise the questions, although the defects were curable. In the circumstances, we order each side to bear their own costs, both here and in the court below. H. Chibomba SUPREME COURT JUDGE E. N. C. Muyovwe SUPREME COURT JUDGE E. M. Hamaundu SUPREME COURT JUDGE