Sundaram and Anor v Kawina (Appeal 76 of 2017) [2018] ZMCA 376 (27 February 2018)

IN THE COURT OF APPEAL FOR ZAMBIA APPEAL NO. 076 OF 2017 HOLDEN AT KABWE (Civil Jurisdiction) BETWEEN: SATYAM SHIV AN ARAM CLASSIC MINING AN AND 1st APPELLANT 2nd APPELLANT GIVEN CHISAKULA KAWINA RESPONDENT CORAM: Chashi, Mulongoti and Kondolo, JJA ON: 4th October 2017 and 27th February 2018 For the 1st and 2nd Appellants: W. B. Nyirenda, SC and K. Mwiinga, Messrs William Nyirenda and Company For the Respondent: Messrs Chilupe and Permanent Chambers - N/A JUDGMENT CHASHI, JA delivered the Judgment of the Court. Cases referred to; 1. Konkola Copper Mines v Copper Fields Mine Service Limited (2010) ZR, 156 2. E and M Storti Mining Limited v Twampane Mining Co-operative Society Limited (2006/HL/ARB/l) - Unreported. 3. Hickman v Kent or Romney Marsh Sheep Breeders Association (1915) 1 ChD 881 4. Arthur Nelson Ndhlovu and Dr. Jacob Mumbi Mwanza v Al Shams Building Materials Company Limited and Jayesh Shah (2002) ZR, -J2- 5. City Express Services Limited v Southern Cross Motors Limited (2007) ZR, 263 6. Printing and Numbering Registration Company v Simpson (1875) LRRIGEQ, 462 7. Zambia Revenue Authority v Tiger Limited and Zambia Development Agency - SCZ, Selected Judgment No. 11 of 2016 8. Holmes v Lord Keyes (1959) Ch 199 9. The Attorney General v Marcus Kapumba Achiume (1983) ZR 1 10. Mususu Kalenga Building and Winnie Kalenga v Richman’s Money Lenders Enterprises (1999) ZR, 27 Legislation referred to: 1. The Arbitration Act, No. 19 of 2000 2. The Companies Act, Chapter 388 of the Laws of Zambia Other Works referred to: 1. A Concise Law Dictionary by P. G. Osborn 5th edition. 2. Halsbury’s Laws of England, 4th edition Volume 16 3. A Practical Guide to International Commercial Arbitration by Richard Garnet, Henry Gabriel, Jeff Waincymer and Judd Epstein 4. The Digest, 2nd Reissue, Volume 9 (1), Companies 5. Halsbury’s Laws of England, 4th edition Reissue, Volume 7 (1) Companies 6. Halsbury’s Laws of England, 4th edition Reissue, Volume 44 (1), Hailsham of St. Marylebone, Butterworths, London, 1995 7. A Practical Approach to Arbitration Law, Andrew and Keren Tweedale, Blackstone Press Limited, London 8. Russell on The Law of Arbitration, 17th edition, by Anthony Walton, Stevens and Sons Limited, London 9. Arbitration in a Nutshell, 2nd edition by Thomas E. Carbonneau, West -J3- 10. Redfern and Hunter, Law and Practice of International Commercial Arbitration, 3rd edition, Sweet and Maxwell, London 1999 This is an appeal by the 1st and 2nd Appellants, whom we shall refer to in this Judgment as the Applicants, against the decision of the learned High Court Judge dismissing their application to set aside an arbitral award. The application before the learned High Court Judge was by way of Originating Summons and was made pursuant to section 17 (2) (iii) and (iv) of The Arbitration Act1 seeking to set aside the arbitral award on the following grounds: (1) That the arbitrator went beyond the scope of the arbitral process by awarding 49% of the shares in the 2nd Applicant company when in fact the respondent only claimed 24% in the Writ of Summons which she verily believes was her due entitlement as per her existing shareholding certificate. (2) That the arbitrator went beyond the scope of the arbitral process by relying on the audit report of Messrs Thewo and Company to determine the value and profitability of the company. (3) That the arbitrator went beyond the scope of the arbitral process by relying entirely on the audit report to determine the profitability of the company and thereby totally ignoring the parties evidence adduced during the process. (4) That the arbitrator went beyond the scope of the arbitral process when he relied entirely on the audit report in writing back to the profit of the company matters relating to the salary of the 1st Applicant, rental issues and expatriate employee salaries. In affirming these matters the profitability of the company was totally misconceived and -J4- totally outside the scope of the arbitral process as accounting norms do not allow such kind of write backs. (5) That the composition of the arbitral tribunal was not in accordance with the agreement of the parties and/ or the articles of association of the company. After considering the affidavit evidence and the submissions, the learned High Court Judge noted that, an application to set aside an award as enunciated in the cases of Konkola Copper Mines v Copper Fields Mine Service Limited1 and E and M Storti Mining Limited v Twampane Mining Co-opreative Society Limited2 is not intended for the court to review the award of a tribunal or to conduct a hearing akin to an appeal. On the issue of whether the arbitrator went beyond the scope of the arbitral process, the learned Judge found that the dispute before the arbitrator was contained in the amended statement of claim and the Applicants statement of defence and that was what was arbitrated on. Thus the arbitrator dealt with the issues which were before him and rendered a decision; he was not bound by the claims which were before the High Court and as such he did not go outside the scope of issues which were submitted to arbitration. The learned Judge opined that if the Applicants were of the view that the arbitrator had exceeded the scope of the arbitral process or his authority, they should, in accordance with Article 4 of the Model Law, have raised the objection before filing the statement of defence. By not doing so, the Applicants waived their right to -J5- object; they subjected themselves to arbitration and efforts to impugn the jurisdiction of the arbitrator were duly dismissed by the arbitrator and subsequently the High Court. On the reliance on the audit report (the report) it was noted that the appointment of the auditors was by the consent of the parties, by way of a Consent Order dated 21st September 2012, in which they were required to produce an independent audit verification report. The report was given to both parties before the evidential hearing at the arbitration. The auditor, being the person who produced the report, appeared before the tribunal as an expert witness and was cross examined by both parties. Therefore, the report was tested and the arbitrator by relying on the same cannot be said to have exceeded the scope of the arbitral process. The learned Judge was of the view that the parties had sufficient opportunity to interrogate the report and impugn it. They were also given full opportunity to present their case and the issue of natural justice does not therefore arise. The award was rendered after the arbitrator considered all the evidence that was before him. As regards the composition of the arbitral tribunal, the learned Judge was of the view that the parties were well aware of Article 24 of the articles of association of the company (the articles) which provided for referral of the dispute to two arbitrators, each appointed by either party to the dispute. -J6- The parties however settled on one arbitrator and submitted to his jurisdiction. Arbitration is premised on party autonomy, which means that the parties can agree on how they should proceed and the court will not interfere with such agreement. According to the learned Judge, if they had any objection to the composition they should have raised the objection at the earliest time. By not raising the objection until after the award had been delivered, the principle of waiver applied and they were estopped from raising the issue. That in accordance with Article 4 of the Model Law, the Applicants are deemed to have waived their right to object. Dissatisfied with the Ruling of the learned High Court Judge, the Applicants appealed to this Court advancing five grounds of appeal couched as follows: (1) The court below erred in law and in fact in holding that the Applicants were estopped from raising the objection against the composition of the arbitral tribunal, which composition contradicted the parties written agreement and the company’s articles. The provisions of the articles are a matter of statute, namely the Companies Act, and there can be no estoppel against statute. (2) The court below erred in law and fact to hold that arbitration is based on consent and that parties have autonomy to adapt the particular arbitration relationship and effectively ignored or overlooked the parties written agreement and articles which expressly prescribed that the composition of the arbitral tribunal was to be two arbitrators, -J7- each appointed by either party to the dispute and whose mode of amendment is provided for by statute and which prescription was not abided to. (3) The court below erred in both law and fact when it held that the arbitrator was not bound by the claims that were before the High Court when the pleadings before the High Court formed part of the record in the arbitral process. The matter before the High Court is the same matter that was subject of the arbitration. (4) The court below erred both in law and fact when it held that the arbitrator did not exceed the scope of the arbitral process by relying on the audit report to determine the value and profitability of the company. (5) The court below erred both in law and fact in not holding that the arbitrator went beyond the scope of arbitral process by entirely relying on the audit report to determine the profitability of the company. At the hearing of the appeal, Counsel for the Applicants, State Counsel Nyirenda, relied on the Applicants heads of argument which he augmented with brief oral submissions. In arguing the first ground of appeal, Counsel drew our attention to the learned High Court Judge’s holding at pages 22 and 23 of the record of appeal (the record), where she stated as follows: “As submitted by Mr. Mandona, arbitration is premised on party autonomy. The parties can agree on how they should proceed and the court will not interfere with such agreement. If the applicants had any objection to one arbitrator presiding over the arbitral proceedings, they should have raised the -J8- objection at the earliest time. The e-mail dated 30th July, 2008, that the Applicants seem to rely on and in which the Applicants raised the issue of the second arbitrator was addressed to the Applicants’ own advocates, then Messrs MNB Legal Practitioners. The issue of second arbitrator was not raised at arbitration and in any case, the e-mail was written way after the Applicants had settled the statement of defence to the arbitration. Strictly speaking, the Applicants never raised the issue of the need of the second Arbitrator with the arbitral tribunal. Therefore, by the principle of waiver, the Applicant is estopped to raise the said objection after the award had been delivered. ” It was Counsel’s submission that the learned Judge’s holding is flawed in many respects. First, it advances the proposition that there is estoppel against statute. Second, it does not recognise the fact that an objection premised on estoppel can be raised at any stage of the proceedings. Third, it further entails that parties can agree on how to proceed and the court will not interfere with such agreement, even when the said agreement is illegal. Finally that the learned Judge’s finding on the e-mail of 30th July 2008 does not acknowledge the fact that the same was sent to the arbitrator concerning the issue of the arbitrators and was merely copied to the lawyers. -J9- State Counsel drew our attention to section 17 (2) (iii) and (iv) of The Arbitration Act1 and submitted that an arbitration must be conducted in accordance with or within the confines of the existing laws, failure to which the same ought to be set aside by the courts. He argued that the court ought to have seriously taken note that the arbitral clause, which was also an article of association was of a binding nature. That by virtue of section 7 of The Companies Act2, articles of a company are a matter of statute and can only be amended in accordance with section 8 of that Act. Counsel cited the case of Hickman v Kent or Romney Marsh Sheep Breeders Association3 where Astbury states as follows: “The memorandum and articles shall, when registered, bind the company and members thereof to the same extent as if they had been signed and sealed by each member and contained covenants on the part of each member, his heirs, executors and administrators, to observe all the provisions of the memorandum and of articles" He further stated that: “The articles are a contract only as between the members inter se in respect of their rights as shareholders" Therefore, articles are a matter of statute and there can be no estoppel against a statute. The cases of Arthur Nelson Ndhlovu and Dr Jacob Mumbi Mwanza v Al Shams Building Materials Company Limited and Jayesh Shah4 and City Services Limited v Southern Cross Motors Limited5 were also cited to support that position. -J 10- It was further argued that there can be no waiver or indeed a delay in raising an objection premised on statute. He concluded that the purported amendment to the arbitral clause did not meet the requirements of section 8 of the Companies Act and was therefore illegal. It cannot take effect and the court cannot perpetuate an illegality by disregarding the law. As regards ground two, State Counsel submitted that, whilst the holding of the court below was not entirely true, he recognised and appreciated that parties can have an ad hoc agreement and proceed as agreed. However, there cannot be a valid agreement by the parties, enforceable by the courts if it violates statute. That similarly, the agreement must be unequivocal. According to Counsel, the articles constituted a valid arbitration agreement among the parties avoidable only by written consent of the parties and alterable only by amendment in accordance with the Act. That therefore, to contend that arbitration is based on consent and that parties have autonomy to adopt the particular arbitration relationship without taking into context the nature of the arbitral clause is grossly misleading. On ground three, State Counsel referred us to Section 10 of The Arbitration Act1 which provides as follows: “A court before which legal proceedings are brought in a matter which is the subject of an arbitration agreement -J 11- shall, if a party so requests at any stage of 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’’ It was State Counsel’s submission that instead of referring the parties to arbitration, the Deputy Registrar, by way of an Order appearing at page 181 of the record stayed the proceedings and referred the dispute to arbitration. Therefore, what was referred to arbitration was only the dispute before the High Court and that is what was to be considered by the arbitrator, so long as no leave to amend pleadings before the High Court was obtained. He further submitted that before the High Court, the dispute was restricted to 24% shareholding. However, upon arbitration, the arbitrator considered shareholding of 49% for the Respondent which was clearly in excess of his jurisdiction and scope. Our attention was also drawn to pages 18 - 19 of the record of appeal where the learned trial Judge held as follows: "The Respondent’s submissions therefore that the proceedings in the High Court were discontinued is not correct. It is further not in dispute that the referral of the matter to arbitration was at the instance of the Applicants and as submitted by Counsel for the Applicants what was referred to arbitration was the dispute between the parties -J 12- or the proceedings that were before the High Court... it is my considered view that the arbitrator was not bound by the claims before the High Court and as such his decision did not go outside the scope of the submissions to arbitration. ” Counsel contended that, having found that, what was referred to arbitration was the dispute before the court, the court below erred when it held that the arbitrator was not bound by the claims before the High Court. As regards ground four, the argument is premised on the audit report relied upon by the arbitrator in determining the value and profitability of the company which according to Counsel was marred by accounting anomalies, such that, placing evidential weight on the report invariably resulted in a flawed and erroneous determination by the arbitrator. According to Counsel, the auditors applied erroneous principles of calculating the value of the company and indeed the profitability. He submitted that the arbitrator, in relying on the report caused the Applicants substantial injustice. That while it is not the role of the courts to review the decision of the arbitrator, it has to play its role to preserve the arbitral process. On ground five, State Counsel submitted that the arbitrator, in relying entirely on the erroneous audit report by auditors who were -J 13- chosen by the Respondent and whose report was favourable to the Respondent and by failing to consider the evidence adduced by the Applicants during the arbitral process, acted unfairly, was biased and in breach of the rules of public policy. Reference was made to Section 17 (2) (b) of The Arbitration Act1 and the case of Zambia Telecommunications Company Limited v Celtel Zambia Limited6 on the issue of public policy. On the issue of bias, Counsel contended that, it is not whether or not actual bias existed but that mere perception of bias is sufficient. That in relying entirely on the audit report, the arbitrator only considered the position of one party and not the other; which action amounted to misconduct and raised the issue of public policy, which is a ground for setting aside an arbitral award. It was the Applicants’ prayer that we should allow the appeal and set aside the arbitral award. Although there was no representation on the part of the Respondent at the hearing, we have taken into consideration the Respondent’s heads of argument which were filed on 16th August 2017. In response to ground one, the Respondent submitted that the ground consists of two limbs. -J 14- The first limb, clearly shows that both parties actively participated in the agreement regarding the choice of the arbitrator and also in the arbitral proceedings following the parties agreement on their choice of one arbitrator. The Applicants were therefore estopped from challenging the composition of the arbitral tribunal. On the definition of estoppel, the Respondent relied on the learned authors of A Concise Law Dictionary1 at page 126, where among other things it is defined as follows: “The rule of evidence or doctrine of law, which precludes a person from denying the truth of some statement formerly made by him, or existence of facts which he has, by words or conduct, led others to believe in. if a person by a representation induces another to change his position on the faith of it, he cannot afterwards deny the truth of his representation... ” Further reliance was placed on Halsbury’s Laws of England2 at page 1505 (b) where it is stated that: “Where a person by words or conduct made to another, a clear and unequivocal representation of fact, either with knowledge of its falsehood or with intentions that it shall be acted upon, or less so conducted himself with another -J 15- who as a reasonable man understands that a certain representation of fact was intended to be acted on and the other has acted on the representation and thereby altered his position to his prejudice, an estoppel against the party who made the representation and he is not allowed to aver that a fact is otherwise than he represented it to be” On the issue of waiver our attention was drawn to Article 4 of the First Schedule to The Arbitration Act1. Further, to a book entitled A Practical Guide to International Commercial Arbitration3 under the heading “bases of challenge” where the learned authors stated as follows: “If a party becomes aware of circumstances before or during the proceedings that may be grounds for complaint to the arbitral tribunal but chooses to remain silent, until after the award is delivered, then agreeably, the party should not be allowed to challenge the award on that ground. By its inaction, the party maybe considered to have waived the objection and so cannot later raise it as a ground of challenge” The Respondent submitted that the proposal to appoint a single arbitrator came from the Applicants and the Respondent accepted the proposal, leading into an agreement by the parties to accept one arbitrator. -J 16- Subsequently, the parties participated in the arbitral proceedings and no objections were raised in that respect. The Applicants therefore, conclusively waived all their rights to object and the court below was therefore on firm ground to hold that the doctrine of estoppel applied to the Applicant’s conduct in the matter. On the second limb, the Respondent submitted that the Applicants’ arguments are seriously flawed and would appear to flow from lack of appreciation of arbitration as an independent alternative dispute resolution created under The Arbitration Act1. Reference was made to The Digest, 2nd Re-issue Volume 9 (1) Companies4 (4) parts 1-2 (13) paragraph 401 (94) under the general rules at page 17 where it is stated that: “(1) The interpretation of the apparently conflicting decisions and dicta on Section 16 of 1862, reenacted by 14 (1) of 1908 Act (repealed) was that though articles of association could neither constitute a contract between a company and an outsider nor give any individual member special contractual rights beyond those of the members generally, they did in fact constitute a contract between a company and its members in respect of their ordinary rights as members. (2) An article which provides for reference of disputes to arbitration was a sufficient submission in writing within the Arbitration Act 1883 ss. 4, 27 (repealed)” -J 17- Also, Halsbury’s Laws of England5, on companies, paragraph 137 at page 102 which states inter alia as follows: "... the memorandum and articles of association when registered, bind the company and its members to the same extent as if they respectively had been signed and sealed by each member to observe... The articles should be regarded as a business document and should be construed so as to give them reasonable business efficacy... ” It was the Respondent’s submission that the articles of a company constitute a contract between the shareholders and are not matters of statute. According to the Respondent, any contract is capable of being altered or amended with the consent of the parties. That the agreement to appoint a single arbitrator was therefore valid and enforceable between the parties. The case of Printing and Numbering Registration Co v Simpson6 was cited, where Judge Sir George Jessel, made the following observations: “If there is one thing more than another which policy requires, it is that men of full age and complete understanding shall have the utmost liberty in contracting -J 18- and their contract when, entered into freely and voluntarily, shall be enforced by courts of justice” It was the Respondent’s contention that the court below was on firm ground to reject the Applicant’s argument and to state that they were estopped from challenging the composition of the arbitral tribunal after having actively participated in the proceedings. Further, that the Applicants’ argument that the articles of the company are a matter of statute is not sound both in law and fact. In response to ground two, the Respondent referred us to the learned authors of A Practical Guide to International Commercial Arbitration3, paragraph 1.3, page 3, where they state as follows: “A fundamental aspect of arbitration is that it is based on consent. The parties therefore have significant freedom to adopt the particular arbitration to the need of their contractual relationship. This “party autonomy” means that even if a contract has no arbitration agreement, arbitration can still be agreed upon when the dispute arises. Conversely, if the contract has a binding arbitration agreement, the parties can still agree not to use it, but instead litigate... ” Reference was also made to Article 10(1) of The Arbitration Act1 which provides that parties are free to determine the number of arbitrators and submitted that the parties agreement to appoint one -J 19- arbitrator was not intended to oust the articles, but to merely put into effect the agreement to refer the parties to arbitration, which the parties were legally entitled to. In response to ground three, it was submitted that, at the time of the arbitrators appointment, he was not familiar with the dispute that existed between the parties and the pleadings before the High Court were not transferred to him. The disputes before the arbitrator were done through the amended statement of claim and statement of defence. It was the Respondent’s submission therefore that in view of the afore stated, the court below was on firm ground in rejecting the argument by the Applicants that the arbitrator was wrong not to have taken into consideration pleadings which were before the High Court. Arbitration enjoys unfettered party autonomy and therefore gives parties latitude to define their own procedure and approach; as such proceedings already in the High Court cannot unilaterally be added or introduced before an arbitrator, unless with the consent of the parties. Grounds four and five were argued together, as according to the Respondent they bordered on the audit report, which was produced with the consent of the parties to the arbitral proceedings. The Respondent contended that the arguments in this regard by the -J 20- Applicants appear to trespass into the merits of the award and not to challenge the process. It was submitted that, as correctly observed by the learned Judge, the two grounds did not appear to fall within the provisions of section 17 (2) of The Arbitration Act1. The Applicants having been presented with the audit report and having heard evidence on it and cross examined the witness thereon, clearly waived their rights and are estopped from impugning it after delivery of the award, as they did not challenge it immediately or within reasonable time. We were urged to dismiss the appeal with costs as it lacked merit. In reply on the issue of choice of one arbitrator, it was submitted that an amendment of the arbitral clause without compliance to section 8 of The Companies Act2 is without basis and constitutes an admission of criminality. Although State Counsel, in reply went on to submit extensively and cited further authorities, the arguments in reply were mainly a repetition of the Applicant’s earlier arguments. It will therefore serve no useful purpose to restate them in detail. We have considered the record of appeal, the Judgment of the court below and the arguments by the parties. From the onset, we take recognizance that the only recourse a party aggrieved with an award -J 21- of an arbitrator has is by applying for setting aside of the award in accordance with the provisions under section 17 of The Arbitration Act1, upon furnishing proof of the existence of circumstances or grounds as set out in the said section. Section 17 reads as follows: “17 (1) Recourse to a court against an arbitral award may be made only by an application for setting aside in accordance with subsections (2) and (3). (2) An arbitral award may be set aside by the court only if:- (a) the party making the application furnishes proof that: - (i) a party to the arbitration agreement was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the laws of Zambia; (ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; (Hi) the award deals with a dispute not contemplated by, or not falling within the terms of, the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the -J 22- decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; (iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or failing such agreement, was not in accordance with this Act or the law of the country where the arbitration took place; or (v) the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made; or (b) if the court finds that: - (i) the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Zambia; or (ii) the award is in conflict with public policy; or (Hi) the making of the award was induced or effected by fraud, corruption or misrepresentation. ” -123- In the case of Zambia Revenue Authority v Tiger Limited and Zambia Development Agency7, the Supreme Court opined that it can be discerned from section 17, that there are two sets of grounds upon which an award maybe set aside. The first ground falls under section 17 (2) (a) from (i) to (v) and the second ground falls under section 17 (2) (b) from (i) to (iii). The Supreme Court went on to state that the threshold that a party must attain under section 17 (2) (a) in order for the court to set aside an award is that he has to furnish proof that circumstances contained in the grounds exist. As regards the threshold for grounds under section 17 (2) (b) is a finding by the court that the award is caught up in one of those grounds falling under (i) to (iii) of the subsection. The argument advanced by the Applicants in the court below reveal that in seeking to have the arbitral award set aside, they relied solely on section 17 (2) (iii) and (iv) and only on two grounds, namely that; the composition of the arbitral tribunal was not in accordance with the agreement as provided for under Article 24 of the articles and that the award deals with disputes not contemplated by, or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. In determining the appeal, we shall consider grounds one and two together as they are related, in that they both relate to the issue of -J 24- the composition of the arbitral tribunal. Grounds three, four and five will also be considered together as they are all questioning the scope of the submission to arbitration. In considering grounds one and two, the first port of call is to determine the effect of articles as they relate to The Companies Act2. The argument by the Applicants is that, the articles are a matter of statute; namely The Companies Act2 and as such, they have to be strictly adhered to, they cannot be waived or altered without following the laid down procedures under that Act. Further that, there can be no estoppel against statute. As interesting and enticing as this proposition is, the Applicants have not provided us, with any authorities to support the assertion that articles of association are a matter of statute. It is common cause that on formation of a company limited by shares, there is a requirement for the companies articles of association to be registered. The promoters of the company however, have an option; they may rely upon the model articles as provided in the first schedule to The Companies Act2 or prepare and register personalised articles as was done in casu where personalised articles were registered as evidenced at page 31 of the record. -J 25- The mere fact that there is a requirement under The Companies Act2 to register the articles and The Companies Act2 contains model articles does not give the articles the effect and force of a statute. We are sanguined in our understanding by the Hickman3 case, where it was held that articles constitute a contract between a company and its members in respect of their ordinary rights as members. Astbury J, at page 899 went on to say as follows: “The articles thus become in effect a contract under seal by each member of the company and regulate his rights. They cannot of course diminish or affect any liability created by the express terms of the statute; but as I have said the statute does not purport to settle the rights of members inter se, it leaves those to be determined by the articles, which are the social contract regulating those rights. I think it was intended to permit perfect freedom in that respect” On the other hand, articles have sometimes been held, if not to contain, at any rate, to be evidence of, an enforceable contract between the company and its members apart from their status of membership. -126- In addressing the issue of articles, Jenkins LJ, in the case of Holmes v Lord Keyes8 had this to say at page 215: “The articles should be regarded as a business document and should be construed so as to give them reasonable business efficacy where a constructing tending to that result is admissible in that language, in preference to a result which would or might prove unworkable” In view of the aforestated authorities, articles can not be said to be a statute as a statute is a written law passed by a legislative body. To put this issue to rest, the learned authors of Halsbury’s Laws of England6 when commenting on the relationship of Acts to contracts had this to say at paragraph 1367: "it does not follow that, because it is confirmed by an Act, a contract has the force and effect of an Act” The Applicant’s arguments that articles are a matter of statute are therefore misguided. Reverting to the ground of appeal, the learned Judge found that the issue of the second arbitrator was not raised at arbitration and therefore following the principle of waiver, the Applicants were estopped from raising the objection after delivery of the award. We find this to be a misapprehension of facts by the learned Judge. The record at page 52, being the interim final award shows that the -J 27- issue of the appointment of the arbitrator as a sole arbitrator was raised and dealt with. This is what the arbitrator said, in line 18 of the record: “In the interlocutory ruling rendered on 17th July 2009 (the 1st interlocutory ruling) and 17th August 2010 (the 2nd interlocutory ruling) I dealt with the issues surrounding the validity of my appointment as a sole arbitrator; the validity of the arbitration agreement between the parties as well as whether the arbitrator had jurisdiction over the dispute” The arbitrator applied the doctrine of Kompetenz - Kompetenz and ruled on his own substantive jurisdiction. As was observed by the learned authors of A Practical Approach to Arbitration Laws7 at page 75: “Any such ruling may be challenged by any available arbitral process of appeal or review... If a party wishes to challenge the decision of the arbitral tribunal, then it is the courts that have the final say as to whether the arbitral tribunal does in fact have jurisdiction” The learned authors went on to state that the parties rights may be lost if a party is dilatory in making the objection. They state at page 182, paragraph 12.1.2 as follows: -J 28- “the right of a party to make an application may be lost where that party continues the arbitral proceedings knowing that the arbitral tribunal lacks jurisdiction. During the course of arbitration, a party must object as soon as possible. A party who takes part or continues to take part in an arbitration, despite having an objection to the proceedings may lose the right to raise the objection before the arbitral tribunal or the court at a later stage. The right to object may be lost if the party failed to make its objection known as soon as it arose, or within the time limits provided either by the arbitration agreement or the Act” In his ruling which appears at page 133 of the record the arbitrator at pages 136 - 137 in dealing with the jurisdiction took into consideration Article 16 (2) of the Model Law which stipulates that the objection “shall not be raised later than the submission of the statement of defence” otherwise a party failing to raise objection before taking steps on the merits will be deemed to have waived the right to object pursuant to Article 4 of the Model Law. The arbitrator came to the inescapable conclusion that by actively participating in the arbitration proceedings in the manner the Applicants did, they recognised the jurisdiction of the tribunal and in the circumstances effectively waived their rights to challenge the jurisdiction. -J 29- The arbitrator refused to accept the Applicants excuse for the inordinate delay in raising the objection, namely that they were improperly guided on the matter, to be a justifiable reason to circumvent the waiver. The position the arbitrator took is strongly supported by the learned authors of Russell on the Law of Arbitration8 at page 176 where they state as follows: “Irregularities in the mode of conducting an arbitration will be waived if by the party continuing the proceedings with full knowledge and without protest. The courts will not permit a party to lie by or act in an indecisive manner so as to obtain the benefit of the award if it is in his favour and endeavor to set it aside if it is not” It is evident from the record, in particular from the High Court Judgment appearing at page 140 of the record that after the arbitrator’s ruling the Applicants challenged the ruling pursuant to rule 11 (1) (c) of the Arbitration (Court Proceedings) Rules 2011. Hon. Mr. Justice I. C. T. Chali in his Judgment of 1st February 2011, which appears at page 209 of the record, dismissed the application by the Applicants as it lacked merit. That Judgment of the High Court was not appealed against and is final. The same issues should not have been raised again before the High Court on the pretext of setting aside the arbitral award. -130- In the view we have taken, the learned Judge was on firm ground when she found that by not raising the objection at the earliest time, until after the award, the principle of waiver applies and the Applicants are estopped from raising the issue in accordance with Article 4 of the Model Law. They are deemed to have waived their right to object. Grounds one and two have no merit and are accordingly dismissed. As regards grounds three, four and five, the two issues which arise therefrom are as follows: (1) Whether the court below erred when it held that the arbitrator was not bound by the claims that were before the High Court as in the Applicants view they formed part of the record in the arbitral process. (2) Whether the court below erred when it held that the arbitrator did not exceed the scope of the arbitral process by relying on the audit report to determine the value and profitability of the company. In determining the first issue, we take note that indeed initially there were court proceedings before the High Court which were commenced by the Respondent. The Proceedings, in accordance with section 10 of The Arbitration Act1 were stayed and the parties referred to arbitration. It is the Applicants argument that instead of referring the parties to arbitration, the learned Deputy Registrar referred the dispute to arbitration. The Applicants’ contention is that the dispute, -J 31- contained in the pleadings before the High Court is what was referred to arbitration. State Counsel Nyirenda in his arguments referred us to the holding by the learned Judge at pages 18 - 19 of the record where she held that it was not in dispute that what was referred to arbitration was the dispute between the parties and not the parties or proceedings that were before the High Court. Essentially attacking a finding of fact. In line with the holding in the case of the Attorney General v Marcus Kapumba Achiume9, the appellate court will not reverse findings of fact made by a trial Judge unless it is satisfied that the findings in question were either perverse or made in the absence of any relevant evidence or upon a misapprehension of facts, or that they were findings of the evidence no trial court acting correctly can reasonably make. Clearly the Deputy Registrar referred the dispute to arbitration. We therefore find the holding by the learned Judge perverse as it flies directly in the teeth of Section 10 of The Arbitration Act1 which clearly states that it is the parties who are referred to arbitration, and not the dispute. We therefore accordingly upset that finding. However, in view of the fact that it is the parties who are referred to arbitration and not the dispute, the pleadings before the High Court were not transmitted to the arbitrator. The parties had an option -J 32- by consent to either adopt the pleadings which were before the High Court or agree to formulate fresh ones for reference to arbitration. In casu, the parties agreed to submit to arbitration after the Order for directions were issued and the issues they agreed to be determined were contained in the amended statement of claim and the statement of defence in accordance with Article 23 of the Model Law; and it is the disputes contained therein which the arbitrator resolved in making the arbitral award. The parties have the freedom, the legal right to engage in arbitration and to make specific provisions for the implementation and operation of their arbitration. As was observed by the learned authors of Arbitration in a Nutshell9 at page 12: “Once a dispute arises, the parties to an arbitral clause, usually enter into a submission agreement. The submission functions as the threshold step to arbitration. It establishes the matters for disagreement. In so doing it defines the arbitrator’s jurisdictional authority. The submission eventually leads to the initiation of the arbitral proceeding through the appointment of the arbitrator” Again Article 4 of the Model Law comes into play here. The Applicants never made any objection to the disputes which were -J 33- before the arbitrator as they were raising in the court below until after the award was made. The courts’ primary duty is to safeguard the integrity of the arbitral process and where, from the conduct of the parties it can be gleaned that the integrity of the process was affirmed by the parties not making timeous objections to any aspect of the proceedings, the courts cannot and should not entertain an attempt on the part of the Applicants to re litigate a matter that has been properly dealt with by the arbitral tribunal. In the view we have taken, the learned Judge cannot be faulted for holding that the arbitrator was not bound by the pleadings which were before the High Court. In relation to the second issue, which is in respect to the audit report, without belaboring the point, we note that the auditors were appointed by way of a Consent Order appearing at pages 104 - 105 of the record. The parties by the said Order consented to the appointment of the auditors to carry out a forensic audit and that a report be submitted to each of the parties and that there be sufficient discovery of documents between the parties. It is also worth noting that at the arbitral evidential hearing, Mr. Albert Lubisani Lungu, a partner in the accounting firm took the stand as an expert witness and presented the report. -J 34- It is not in dispute that this witness was cross examined by the parties’ respective Counsel, who took turns in interrogating the report and getting clarifications thereon. It is also evident from the Interim Final Award, that apart from the audit report itself, the aforestated interrogations and clarifications were taken into consideration by the arbitrator as well as the written submissions by both parties in arriving at his findings and the award. To argue at this juncture that the report was marred by accounting anomalies and erroneous principles of accounting, when they had the opportunity to put those issues to the arbitrator is an attempt on the part of the Applicants to seek a review of the tribunals decision as was held in the Konkola Copper Mines1 case. The learned authors of Redfern and Hunter, Law and Practice of International Commercial Arbitration10 at pages 417 - 418 in addressing this issue aptly put it, thus: “Arbitral rules such as those of UNCITRAL... provide unequivocally that an arbitration award is final and binding. These are not intended to be mere empty words. One of the advantages of arbitration is that it is meant to result in the final determination of the dispute between parties. If the parties want a compromise to be proposed, they should opt for mediation. If they are prepared to fight -J 35- the cause to the highest court in the land, they should opt for litigation. By choosing arbitration, the parties choose a system of dispute resolution that results in the decision that is in principle final and binding. It is not intended to be a proposal as to how the dispute might be resolved, nor is it intended to be the first step on a ladder of appeals through national courts” Following on the aforestated, we note that under ground five, the Applicants seek to introduce arguments relating to bias and public policy under Section 17 (2) (b) of The Arbitration Act1. As earlier alluded to, not only does the threshold a party must attain in order to have an arbitral award set aside differ from the threshold required under section 17 (2) (a); the issues being raised under Section 17 (2) (b) are being raised before this Court for the first time as they were never issues before the court below. We decline to entertain the arguments in ground five, in line with the Supreme Court holding in the case of Mususu Kalenga Building and Winnie Kalenga v Richman’s Money Lenders Enterprises10. We find nothing that favours the argument that the arbitrator went beyond the scope of the arbitral process. The learned Judge was on firm ground when she held that by referring to, and relying on the audit report, the arbitrator did not exceed the scope of the arbitral process. -J 36- The sum total of this appeal is that all the five grounds of appeal have no merit and they are dismissed. We award costs of this appeal and in the court below to th spondent. The same are to be taxed in default of agreement: COURT OF APPEAL JUDGE J. Z. MULONGOTI COURT OF APPEAL JUDGE M. M. KONDOLO, SC COURT OF APPEAL JUDGE