Kapiri Transport Limited v CLA Commercial Vehicles Limited (2019/ HP/ 688) [2020] ZMHC 466 (1 October 2020)

. .. . . . ·- . - '(" · IN THE HIGH COURT FOR ZAMBIA AT THE PRINCIPAL REGISTRY HOLDEN AT LUSAKA {CIVIL JURISDICTION) BETWEEN: KAPIRI TRNSPORT LIMITED AND 2019 / HP/ 688 APPLICANT CLA COMMERCIAL VEHICLES LIMITED RESPONDENT Before the Honourable Mrs Justice Ruth Chibbabbuka on the 3 rd day o f September, 2020 For the Applicant: Mr K. Chipuya, Messrs G. M. Legal Practitioners For the Res ponde nt : Ms N. Mbuyi & Mr C. Mukatu, Messrs Paul Norah r\dvocates RULING Cases ref erred to: 1. Ody's Oil Company limit ed us The Attorney General & Cons tatinos James Papoutsis SCZ No. 4 of 2012 2. Ocean Bulle Sh1jJping ancl Tracliny SA u.s TMT Asia Limited and Others /2014/ UK SC 3. Stanley Mwambazi /JS Morester Farms Limited (J 977) Z.l? 108 4. Audrey Nyambe us Tot al Zambia Limited, SCZ Judgme11t No. 1/2015 5. Cutts vs H ead (1981) Ch 290 6. Lusa/ca West Development Company, BSI< Chiti (Receiver), Zambia State Insurance Corporation us Turnkey Properties Limited (1990-1992) Z. R 1 (S. C) Legislation referred to: The Arbilratio1t Act, No. 19 of 2 000 Rules of the Suprem e Cowt, 1999 Edition, The White Boole Other works referred to: lfolsbury's Laws of England, page 151, para. 2 12 Zwnlnan Civil Procedure, Commentary and Cases, Volume 1, Patrick Matibini, L exis Nexi.s, 20 7 7 Rl - ,. The respondent in this matter on the 1 st September, 2020 filed a Notice to raise Preliminary Issues to dismiss the application for irregularity pursuant to Order 2 Rule 2- Order 14A Rule 1 and Order 33 Rule 3 of the Rules of the J Supreme Court, 1965 (1999) Edition (The White Boole) to be determined by this court. The issues are outlined below as follows: The Respondent herein intends to raise in limine videlict; to dismiss the a pplicant's application on the following grounds: (i) That the application filed on the 24 th day of June, 2020 be set aside on the ground that a n Arbitration Agreement is a separate and an indqJenclent which survives the termination of the underlying agreement. This 1s known as the doctrine of sep arabi lit y/ scvcrability. (ii) That t.he applicc.lllt in its a pplication has exhibited documents which a rc.; uoid a.b initio sp ecifically exhibit "JM3" and "JM5". That the said documents n eed to be expunged from the court record as the documents a uthored by the respondent's advocates \Vere on a without prejudice basi8. The respondent fil ed a n affidavit. m support of the Preliminary Issues raised sworn by Nathalie Mbuyi couns~l for the r espondent. In that affidavit counsel avers as follows: The applicant has applied to set aside Order for Stay of Execution dated 6 th June, 2020. The respondent entered into a lease agreement with the applicant relating to Stand No . 6876 and 6877 , Natwange Road, Kitwe. The lease agr_eement under clause 20.2 provided, that the dispute be referred to Arbitration. The applicant alleges that the lease agreemenf is null and void for failure to register at the La nds a nd · Deeds Registry. It is the respondents stance that a n arbitration agreement is a separate and an R2 independent agreement which remains valid even after termination of the agreement or any irregularity thereof and this includes failure to register the said agreem ent . The applicant in its application has exhibited documents which are void ab initio specifically "JM3", and "JMS" which records need to be expunged from the court record as the said documents authored by the respondents advocates are on a without prejudice ba sis. The applicant has . exhibited documents which are void ab initio by suppressing material facts and misrepresentation in a bid to obtain a favourable outcome from this Court. The applicant having b een aggrieved by the respondent ought to have taken the appropriate steps to submit the matter to Arbitration but they have failed and neglected to do so. In light of th e a bove the application for the applicant be d is missed. In o ppos ing the prelimina ry issu es raised, the a pplicant filed s ubmiss ions at th e IH:h cs1 <1[ the Cou rt on the lQLh September, 2 020. The gist of the a pplicant's s ubmissio n s a rc as fo llows : in relation to t he: first issu e it wa s counsel's considered view tha t a s t h e arbitration clause was pa rt of a lease that was not registered, the said a rbitration . clause perishes with the lease as the lease is void for want of registration. Counsel argued in the a ltc rn c1 tive that should this court find that the a rbitration clause is severa ble a ncJ !-:ihould be e nforced as a separate agree ment the n the respondent has by its own a~sertions a nd conduct waived its right to arbitrate. Counsel exp lai n ed tha t s in ce the responde nt obtained the stay of proceedings, they h a ve never prosecuted their application by eithe r initiating or supporting Arbitration proceedings and h ave overtime unequivocally indicated that they do not intend on doing so which intention was confirmed in writing as the respond e nt confirmed that the Arbitration process was too expensive. It was counsel's cons.idered view that the respondents' sentiments confirmed their intention not t o be bou nd by the very Arbi tration agreem ent on which the stay ~f proceedings was based. In cnncluding this point counsel contended th at the judgm ent t h a t h as been R3 ·j :I I ! i I 'I I .. ! I ., I I I stayed for the last one year contains aspects such as the payment of utility bills for water and electricity to third parties. Counsel explained that Nkana Water & Sewerage Company Limited are owed K2 l,486.00 by the respondent for water consumed and has now placed the applicant on notice over non payment of this amount. Counsel opined that the rights of a third party should never be affected by an Arbitration agreement that they are not party too. The Court was referred to the· case of Ody's Oil Company Limited vs The Attorney General & Constatinos James Papoutsis1 In relation to the second issue Counsel acknowledged that while the without prejudice rule exists, there are exceptions to this rule as outlined in the case of Ocean Bulk Shipping and Trading SA vs TMT Asia Limited and Others2 , where the court h eld : "i) w he re a clear slutement is made in the without prejudice communication s, Uwt is relied ()n by the other party, giving rise to an estoppel. This d ecision confirm ed the case of Hodgkinson and Corby Limited vs Wards Mobility Services [1997] FSR 178. ii) whe re there is e vidence of perjury, blackmail or other serious and unambiguous improprie ty iii) e vide nce of negotiation s that may be given to explain delay or apparent acquiesce nce during the course of civil proceedings." Counsel a dded that even though a docume nt is n1arked without prejudice it docs not mean that it is so. Counsel contended that the documents exhibited in their affidavit marked "JM3" and "JMS" qualify as an exception to ' the without prejudice rule as they have been produced as an estoppel against the applicant from alleging that they are pro-arbitration when in fact they are not interesled in doing so. It was counsel's considered view that these documents were critical as the respondent would have ~isled this Court to gra nt a stay of proceedings p ending a rbitration when in fact, the respondent 11ever intencted on initiating or proceed ing to arbitration in order to resolve this R4 r dispute. Counsel went on to add that the documents exhibited and marked JM3 and JMS explain the delays during the purported proceedings as over a year has lapsed since the stay of proceedings was granted and the arbitration order made by the court to the applicants without there bein g any progress or conclusion on the same. Counsel opined that the respondent has neglected to see that as litigants they do owe this Court an explanation as to what transactions have taken place over the last 12 months. Counsel reiterated the position that the arbitration clause should perish as the lease on which it is premised is void ab initio and against public policy. Counsel ref erred the court to the ca se of Stanley Mwambazi vs Morester Farms Limited3 in asking the court to n ote tha t the respondent obta ined an ex-parte stay of proceedings one year ago a nd t hat before th e m a tte r could be heard inter-parte at the instance of the a p plican t 's a pp lication to d isch a rge the stay, the respondent has raised th ese p relimi nary issues to d ism iss th e a pplication. Counsel argued further tha t had the c1 pplicant n ot macJe an a pplication to discharge the stay t h e responde n t wou ld have continued s leeping. It was counsel's considered view that whereas th e responde nts a re e n titled to make as many applications, their conduct gives th e impre ss ion th a t 1 hey do not intend to have this matter determined on it s m erits a nd th a t wha tever rent that is due be paid as the responde nt h as n o d efe n ce to thi s cla im . In concluding his a r gume nts, counsel prayed that these documents not be ex pun ged from the record as they serve a critical role to the dispensation of justice by cstoppin g the respondent a right to arbitration when their conduct unequivocally punctuates a contrary intention . . At the hearing of the matter, learned counsel for th e respondent relied on the affidavit in s upport, and their skeleton arguments filed in to court on the 1 st September, 2 020 . Learned coun sel for the applicant ess·entially repeated the c-1pplicant's submissions that were subsequently filed on the 1 Qth September, 2020 . Additiona lly counsel for the applicant argu ~d tha t the effect. of non regis tra tion of a lea s ~ by a p eriod of I year renders such a document null and vnid . RS I am indebted to counsel for their arguments and submissions. I have taken into consideration the said arguments raised and the authorities cited for and against the current application. In addressing the first preliminary issue counsel for the respondent has argued that the arbitration clause survives the termination of the lease based on the doctriqe of severability apd as such the a.pplicant's applicat~on to set aside order for stay of execution be dismissed for irregularity. Counsel for the applicant on the other hand has argued that as the lease was void for want of registration then the arbitration cla use perishes with it. The severability principle advocates that although an arbitration clause is pa rt of a n underlying agreement or contract, it is independent of the other c la u ses in the agreem ent o r con trac t. The need for the doctrine arose so as to c urtail parties from u s ing I.he argume nt that the m a in agreement is not valid a nd there by t h e a r bitrnti<Jn <'1:.rnse forming part of the main · agreem en t also becomes invalid. Be th;{l ;is 11 may h owe ver on the issue of referring matters to Arbitrat ion as p er Secliu 11 J {) <,f th r.: Arbitration. Act, the Supreme Court guided in the case of Audrey Nyambe vs Total Zambia Limited4 , when it stated as follow s: "Counsel for the resp ondent is right that we have passed a number of decisions where w r~ haue given effect to section. 10 of the Act. However, in determining whether a matter'is amen.able to arbitration or not, it is imperative lhat the wording used in the arbitration clause itself are closely studied." Further Sectio,:i. 10 of the Arbitration Act No. 19 of 2000 provides: "A court before which legal proceedings are brought in a matter whi:ch is subject to an arbitration agreernent shall, if ~ party so requests at any stage of the proceedi:7-gs and notwithstanding any writte n law, stay those proceedings and refer the parties to R6 I . I I I I 1, I l I I I arbitration unless it fi nds that the agreement is null and void, inoperative or incapable of being performed." In casu clause 20.4 of the lease provides that: "This clause 20 shall be severable from the rest of this Lease and shall remain in effect e ve n if the Lease terminates." There is a differen ce between the t er~ination of a lease and the lease being void ab initio for want of registration. Termination simply m eans that the agreem ent has come to an e nd whereas th e term null and void or void ab initio r e fer s to t h e validity of the agreem ent. Using the literal rule or plain meaning rule of interpr etation, which says that ordinary words must b e given their ordinary m eaning, t h e arbitra tion cla use in this lease agreement only survives the lease when it comes to an end a nd not when the lease is void ab initio. A peru sal of the lease con firms t hat the said lease is for a term of 5 years and th a t t h e sam e h as n ot bee n rcgi!:itcred. In e ffect a yearly lease h as b een created which will be the subject of th e m a in mc1tt.er. Section 10 of the Arbitration Act clearly mandates th is C()Urt n o t to refe r a matter to Arbitration if it is found th a t the agreement is uuid ab initio. As s u c h I accept the argument by counsel for the a pplica nt that as th e:: lease be tween th e p a rtie s is in fact null and void for want of registra tion the a rbitr ation cla use in effect p erish es with the said lease. This preliminary issu e there fore fai ls f'or want of m erit. Turning now t o the second prelimina ry issu e, counsel for the respond ent h as argued tha t the d ocuments exhibi ted in the respondents' a pplication and m a rked "JM3" and '\JMS" should be expunged from the record a s they are marked without prejudice. It is trite lha t without prejudice communi.cation or corresponden ce in litigation is not to be a dmitted into evidence. The rationale was explained in the case of Cutts vs Head5 per Oliver J, when the court held that: "It is that parties should be e ncouraged as far as possible to settle the ir disputes without resort to litigation and should not be R7 discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much a failure to reply to an offer as an actual reply) may be u sed to their prejudice in the course of the proceedings." That being said however, there are exceptions to this rule as rightly pointed out by counsel for the applicant, A fundamental ,application of this principle is that parties must be seen to be attempting to settle the dispute. The learned author of Zambian Civil Procedure Commentary and Case, Volume 1, Lexis Nexis, 2017, Justice Ma tibini at page 654 states as follows: " .... the marking of a document 'without prejudice' per se, will not make it privileged if in fact the substance of the communication is not a genuine approach to a tte mpt settlement of the dispute." ,Justice Mc1tibi ni go(::s on to exemplify that the Supreme Court in the case of Lusaka West Development Company Limited, BSK Chiti (Receiver), Zambia State Insurance Corporation vs Turnkey Properties Limited6 guided on lhc issu e of dealing with the production of without prejudice communication when it referred to Halsbury's as follows: "Letters w ritten and. oral communications made during a dispute between the parties which are written or made for the purpose of settling the dispute and which are genera lly expressed or othe rwise proved to have been made without prejudice cannot gene rally be admitted into evidence. The rule does not apply to communications which have a purpose other than settle ment of the dispute. Thus it does not apply in respect of a document which, from its character may prejudice the p e rson to whom it is addressed." On a correct reading of the documents exhjbited m the applicant's · affidavit marked "JM3" ~nd "JMS" it is apparent that there is no genuine effort on th e part of the respondent to attempt to settle this m att er via arbitration which is wh:1t the stay of p roceedings which they procured was obtained for. I R8 I I I I I am as such inclined to agree with counsel for the applicant that equity must not only be done but be seen to be done and as it is clear that after a period of 12 months the parties have not even formed a quorum for purposes of arbitration it is clear that this avenue has failed even when the avenue should not have been available to the parties in the first place. Consequently it is only just th at the applicant be given an opportunity to be heard on their application to discharge the stay of proceedings and all matters be determined on their merits a s espoused in the case of Stanley Mwambazi vs Morester Farms Limited as cited by the applicant. The upshot of the m a tter is that the respondent's application fails and th e prelimin ary issues are dismissed. The applicant's application to discharge th e stay s hall now be d etermined on the 26 th October, 2020 at 11 :30am. Leave to a ppeal is grn ntecl . Dated the. .day of . Q .. d~ ...... 2020 J~~- ~ L /_~· Ruth Chibbabbuka JUDGE R9