Date: 2018-04-27

The Ilorin Division of the Court of Appeal has ruled that Kwara State's liability for the payment of N586 million to an engineering firm, Guthrie Nigeria Limited is not a subject of arbitration.

The court held that the incorporation of an arbitration clause in an agreement does not ipso facto mean that the suit filed consequent to the terms of the agreement must be referred to arbitration in all cases.

The firm had filed a suit against the Kwara State Government, Kwara State Ministry of Social Development, Environment and Tourism and the state's Attorney General and Commissioner for Justice before a Kwara State High Court under the undefended lists seeking for the payment of the sums of N586million.

The plaintiff claimed that the money was due to it and that the Kwara State Government has refused to pay even though it had no reason for not paying.

However, upon being served with the writ of summons and the accompanying affidavit in support of the undefended list, the respondents filed a notice to intention to defend the suit, pursuant to Order 23 Rule 3(1) of the Kwara State High Court Civil Procedure Rules.

Apart from indicating their intention to defend the suit, the respondents also filed a notice of preliminary objection in which they asked the court to decline jurisdiction and

After taken arguments from the parties, the trial judge, Justice A.M. Folayan upheld the objection and held that the case was governed by arbitration. He consequently asked the parties to resolve their dispute through arbitration.

Guthrie Nigeria Limited was dissatisfied and filed an appeal before the Court of Appeal in Ilorin, Kwara State.

Justice Hamma Akawu Barka who delivered the lead judgment to which Justices Chidi Uwa and Moses Ugo concurred upheld the argument of the plaintiff/appellant.

His Lordship held that the trial judge ought to have determined the suit on its merit and should not have referred it to arbitration.

The court further held that the respondents had already taken steps to defend the suit after they filed a notice of intention to defend.

The court held: "By the filling of the notice of intention defend, with the accompanying affidavit, the respondents have more or less filed a defence as why judgment ought not to be entered for the plaintiff.

"It is akin to filing a statement of defence, and to me it amounted to taking a sizable step in the proceedings.

"In the context of the case before us, can we say as being argued by the respondents that the filing of the notice of intention to defend, only amounted to putting in appearance in the suit, or that the notice and the preliminary objection having been filed simutaneuolsy, the notice of intention to defend should be construed as no step or action at all? I do not think so."

He held that since the respondents have taken a step, the lower court was in error to have granted a stay of proceedings in view of the clear and plain provisions of Section 5 of the Arbitration and Conciliation Act.

"The appeal succeeds and it is hereby allowed. The decision of the lower court delivered on the 23/3 2017 is hereby set aside," the court held.