Lal v East African Builders Merchants (Civil Appeal No. 53 of 1950) [1951] EACA 50 (1 January 1951)

# COURT OF APPEAL FOR EASTERN AFRICA

Before SIR BARCLAY NIHILL (President), LOCKHART-SMITH (Ag. Vice-President), and BOURKE, Ag. C. J. (Kenya)

## SOHAN LAL, Appellant (Original Plaintiff)

ν.

## EAST AFRICAN BUILDERS MERCHANTS, Respondents (Original Defendants)

## Civil Appeal No. 53 of 1950

(Appeal from the decision of H. M. Supreme Court of Kenya—De Lestang, J.)

Arbitrator's award—Apparent illegality upon the face of—Power of Court to look behind terms of the award and make findings of fact.

The respondents applied to the Supreme Court for an order remitting back their award to the arbitrators for reconsideration. The Court found that an objection to the legality of the award was apparent upon the face of it inasmuch as the arbitrators, having found that the termination of the contract beween the parties was due to slow progress and defective workmanship on the part of the appellant, erred in law in awarding him anything for work done prior to the termination of the contract which was for a lump sum. The application to remit was granted.

iHeld (22-6-51).—That the arbitrators had not stated in their award that the contract was for a lump sum. The Judge was wrong in saying "I infer from these findings (of the arbitrators) that there was here an entire and in was therefore no apparent illegality upon the face of the award and the appeal succeeded.

Cases referred to: Champsey Bhara & Co., Ltd. v. Jivraj Baloo Spinning and Weaving Co., Ltd., L. R. 50 I. A. 324; Saleh Mohamed v. Nathoomal Kessamal, L. R. 54 I. A. 427.

#### D. N. Khanna for the appellant. $\mathcal{D}$

Bhandari for the respondents.

$\mathcal{L}^{\text{max}}$

JUDGMENT (delivered by LOCKHART-SMITH, Ag. Vice-President).—This is an appeal, with the leave of the Supreme Court of Kenya, against an Order made by de Lestang, J. in Kenya Civil Case No. 643 of 1949.

In the course of that suit, an award was filed by Arbitrators appointed under an order of reference made therein, and the defendants moved the Court under Order 45 Rules 14 and 15 of the Civil Procedure (Revised) Rules, 1948, to set aside the award or to remit it to the Arbitrators for reconsideration.

On the 28th of August, 1950, de Lestang, J. made an Order deciding that the application to set aside the award was barred by limitation, but directed that the application for remitting back the award should proceed. He reserved the costs of the application.

On the 27th of September, 1950, the learned Judge ruled that an objection to the legality of the award was apparent upon the face of it (which is one of the grounds under Rule 14 enabling the Court to remit an award—see paragraph $(c)$ that the award must, therefore, be remitted to the Arbitrators, and that as each party had succeeded on one issue each party would bear his own costs of the application to set aside or remit the award.

An order was drawn up accordingly, and from that order the appellant (the original plaintiff) now appeals.

Mr. Khanna for the appellant, contends that there is no objection to the legality of the award apparent upon the face of it. He has referred us to a number of authorities the effect of which is, in my opinion, adequately summarized for the purposes of this appeal, in the following passage from the judgment of their Lordships of the Judicial Committee of the Privy Council in Champsey Bhara and Co. Ltd. v. Jivraj Baloo Spinning and Weaving Co. Ltd., L. R. 50 I. A. 324 (followed by their Lordships in Saleh Mohamed v. Nathoomal Kessamal, L. R. 54 I. A. 427:

"An error in law on the face of the award means, in their Lordships view, that you find in the award or a document actually incorporated thereto, as for instance a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can say is erroneous."

The Award reads as follows: $-$

"WHEREAS East African Builders Merchants by an agreement in writing made between the Mowlem Construction Company Limited on the one part **Builders Merchants** the other African $\overline{on}$ part $and$ **East** undertook the supply of labour for the execution and completion of a certain block of Buildings known as Standard Bank Flats Nairobi within the terms of the contract Agreement in force between The Standard Bank of South Africa Limited on the one part and the Mowlem Construction Company Limited on the other.

AND WHEREAS Sohan Lal by an agreement in writing dated the 14th April, 1949, made between East African Builders Merchants on the one part and Sohan Lal on the other part undertook the supply of labour for the execution and completion of certain carpenters' and Joiners' work at<br>Standard Bank Flats for the sum of Shillings Thirty Thousand (Sh. 30,000/-), the work to be completed by 1st June, 1949, within the terms of the sub-Contract entered into by The Mowlem Construction Company, Ltd., and East African Builders Merchants.

AND WHEREAS a difference has arisen between Sohan Lal and East African Builders Merchants as to the amount of money due to the said Sohan Lal from East African Builders Merchants.

AND WHEREAS the said difference has by order of His Majesty's Supreme Court of Kenya dated 28th March, 1949, been referred to us Frederick Charles Bridle and Ghulam Rasool the Arbitrators appointed by the said Order.

Now We the said Frederick Charles Bridle and Ghulam Rasool having taken upon ourselves the burden of the said Reference and having heard both parties and having inspected the drawings and documents produced to us by the parties and having obtained all other information we require do make and publish our Award as follows: -

- 1. We find that the termination of the Sub-Contract by the Mowlem Construction Company Limited was due to slow progress and defective workmanship on the part of Sohan Lal. - 2. We award that Sohan Lal is entitled to recover from East African Builders Merchants for work executed before the termination of the Sub-Contract the sum of

| Less already received on account: | | | Sh. $12.555/00/-$<br>Sh. $1,000/00/-$ | |-----------------------------------|--|--|---------------------------------------| | | | | Sh. $14.555/00/-$ |

- 3. We award that East African Builders Merchants are entitled to recover from Sohan Lal and to set off the amount against the sum of Sh. $11,555/-$ the sum of Sh. 4,354/- in respect of the pulling down and re-execution of certain work of a defective nature done by Sohan Lal. - 4. We award as regards the Costs of the Action that each side pay their own. - 5. We award as regards the Costs of this Reference and Award amounting to Sh. 1,800/- that this be borne by both parties in equal proportions.

AS WITNESS OUR HANDS THIS TWENTY-NINTH DAY OF JUNE ONE THOUSAND NINE HUNDRED AND FIFTY.

> (Signed) F. C. BRIDLE, (Signed) G. RASOOL, Joint Arbitrators."

> > 冇

Where is the erroneous legal proposition in this Award? Mr. Khanna submits that there is none. It is not disputed that if a contract is an entire one to be completed for a lump sum, the party who is liable to complete the contract works is not entitled to recover anything if he fails to do so. This Court has so held in Civil Appeals 27 of 1949 and 36 of 1950. (Not yet reported.)

But the Arbitrators have nowhere stated this principle and then wrongly applied it. Nor have they erroneously stated any proposition of law.

Even if, as Mr. Bhandari, for the respondent, submits, the second recital of the Award amounts to a finding of fact, I agree with Mr. Khanna that it does not necessarily amount to a finding that the contract was an entire one for a lump sum. The plaint avers that instalments were to be paid for work actually done; the recital itself states that the agreement was to be completed within the terms of the Sub-Contract "which are not stated: and generally the recital is equally consistent with an unexpressed view of the facts and the law on the part of the Arbitrators differing from that contended for by Mr. Bhandari and by which the parties would be bound.

I would go further, however, and say that even if the second recital does amount to a finding of fact by the Arbitrators that the contract was an entire one for a lump sum, and even if the finding in paragraph 1 of the Award amounts to a finding that the contract works were never completed (which it does not expressly say) it is still impossible to find in the Award some legal proposition which is the basis of it "and which you can say is erroneous."

If the Arbitrators had referred to the decisions in Civil Appeals Nos. 27 of 1949 and 36 of 1950, and had then declined to follow them, or if they had said some such thing as "the law is that a contractor who fails to complete an entire contract for a lump sum is nevertheless entitled to payment for so much of the work as is actually done on a quantum meruit basis", then I would agree that there was an objection to the legality of the Award apparent upon the face of it, but in the case of the present Award I find it impossible to reach any such conclusion.

The learned Judge was constrained to *infer* the facts upon which he based his Ruling from what he regarded as the finding which the Arbitrators had made, and he had to apply his own knowledge of the law to the facts before he could say that in law the appellant was not entitled to recover anything from the respondents. He could not rely on any misstatement of the law in the Award itself, because there was none.

When the parties to a dispute refer it for decision to Arbitrators of their own choice and agree to be bound by their decision, they must, ordinarily speaking, be held to be bound by any mistakes of law or fact made by the Arbitrators, and in England many learned Judges have shared the regret expressed by Williams, J. in Hodgkinson and Fernie, 3 C. B. (New Series) 189, that it should ever have become well-settled that an award might be remitted to the arbitrators on account of an error of law apparent upon the face of it. In England, of course, the rule stems from the Common Law and is not, as in India and in this Colony, prescribed by statute.

Mr. Bhandari has referred us to a number of authorities which seem to me to be uniformly against him.

First of all he cites Champsey Bhara's case supra, and suggests that there is an "irresistible inference" that the Abitrators made an error of law on the face of the record in the sense of the passage from their Lordships' judgment which<br>I have quoted above. The plain dictionary meaning of the word "proposition" in<br>this context is, "the act of stating anything; that which is sta and how one can infer that a statement was made which was never made in fact is beyond my understanding. One may perhaps infer from the Award that the Arbitrators did not know what the law was, or that, if they had attempted to state it, they would have stated it wrongly, but that is very far from the same thing as finding in the Award a legal proposition "which you can say is erroneous".

Mr. Bhandari next referred to Meenakshi Mills Ltd. v. Langely & Co. I. L. R. 58 Bombay 288. That was a case where the award was, as Beaumont, C. J., said (at page 294) "based on the construction of by-law No. 74", which by-law the arbitrators had cited in their award and had then wrongly construed. The decision has no possible bearing on the present case.

Mr. Bhandari further referred to-

- (a) a passage in Chitale's Code of Civil Procedure which merely paraphrases the passage from *Chamsey Bhara's* case quoted above. - (b) Sreelal Mangtulal v. Madan, I. L. R. 52 Calcutta 100, in which the Arbitrator's award was "more like a judgment of a Judge, which is subject to appeal, than the award of an arbitrator" (per Sanderson, C. J. at page 110), and in which the arbitrator, having framed issues heard counsel and noted authorities, made a finding "upon the authorities discussed" which the authorities did not support, - (c) a case mentioned at page 160 of the 10th Edition of Russel on Arbitration in which an award was remitted because the arbitrator had exceeded his terms of reference. None of these authorities in my opinion, have any relevance to the present case, or assist Mr. Bhandari in the slightest.

I would allow the appeal.

SIR BARCLAY NIHILL (President).—I concur in the judgment just delivered by the learned Justice of Appeal—this appeal is allowed with costs, which shall include the costs of the cross appeal and the costs of the motion to remit or set aside the award filed in the Court below. And in view of the judgment of this court about to be delivered in the considered appeal 43 of 1950 we direct that this case be remitted back to the Supreme Court of Kenya for judgment in accordance with the provision of Order XLV R. 16.

BOURKE, Ag. C. J. (Kenya).—I agree.