|
Getting your Trinity Audio player ready...
|
BEDDING HOLDINGS LTD v. CAREW
COURT OF APPEAL
(LAGOS DIVISION)
(OHO; ADEGBEHINGBE; DIMGBA; JCA)
FACTS
Bedding Holdings Limited (Appellant), was a tenant in Mrs. Anthonia Olufunke Carew’s (Respondent’s) commercial premises located at No. 55 Adeniyi Jones Avenue, Ikeja, Lagos. The tenancy began in 1988 under a written agreement for a fixed term of eight years, with an option of renewal for an additional two years. At the expiration of the initial term in 1996, disputes arose between the parties as to the terms of renewal. The Respondent consequently commenced proceedings for the recovery of possession. Judgment was eventually delivered in her favour in 2005, wherein the court declared the Appellant a tenant holding over and assessed rent for the property at ₦500,000 per annum. Notwithstanding this judgment, the Appellant remained in possession. In 2006, while still holding over, it received a letter from one Chief Kunle Oyewo, a solicitor who had previously acted for the Respondent. The letter conveyed a proposal for a fresh tenancy arrangement of ten years, at an annual rent of ₦750,000. Acting on this letter, the Appellant accepted the terms and promptly paid the rent for the 2007/2008 tenancy year.
The Respondent, however, in early 2008, expressly disclaimed the solicitor’s letter. She contended that it had been written without her knowledge, consent, or authority. In repudiating the purported tenancy, she appointed a new firm of solicitors who duly issued statutory notices to the Appellant and thereafter instituted fresh proceedings before the High Court of Lagos State seeking recovery of possession. The Appellant, in response, filed a statement of defence and a counterclaim. It insisted that the letter from the solicitor had created a valid and binding tenancy agreement between the parties for a ten-year period. The Appellant also argued that the matter ought not to have been brought before the court at all but referred to arbitration in accordance with a clause contained in the disputed letter. The trial court, after hearing evidence, rejected the Appellant’s arguments. It held that the purported tenancy was invalid, as the solicitor who authored the letter acted without the Respondent’s authority and therefore could not bind her. The court further found that the Appellant had continued in possession unlawfully, and accordingly assessed payment for use and occupation at ₦500,000 per annum from March 2007, deducting the ₦750,000 already paid for 2007.
Dissatisfied with this outcome, the Appellant lodged an appeal to the Court of Appeal. One of the issues considered for determination was: whether a party who has already taken further steps in a court proceeding can still rely on an arbitration clause to challenge the jurisdiction of the court.
ARGUMENTS
Learned counsel for the Appellant contended that the trial court lacked the requisite jurisdiction to entertain the Respondent’s action in view of the arbitration clause contained in the letter which, according to the Appellant, embodied the agreement between the parties. He submitted that where parties have, of their own volition, freely entered into a contractual arrangement incorporating an arbitration clause, the law imposes on them a binding duty to adhere to the terms of that clause. Such an agreement, counsel argued, necessarily ousts the jurisdiction of the ordinary courts until the arbitral mechanism agreed upon has been first explored and exhausted. Counsel maintained that the Respondent, having ostensibly accepted the terms of the letter by relying on it to assert her interest, could not in the same breath, disregard the arbitration clause contained therein. It was his submission that the Respondent could not be allowed to approbate and reprobate. To do so, he argued, would amount to inequitable conduct and an abuse of the freedom of contract.
Furthermore, learned counsel urged the appellate court to hold that the trial court erred in assuming jurisdiction over the matter when the arbitral remedy had not been pursued. He argued that, at the very least, the Respondent was under a legal duty to first exhaust the arbitral mechanism stipulated in the agreement before approaching the law courts. By failing to do so, the Respondent, in counsel’s view, rendered her suit premature and incompetent. Counsel therefore urged the Court to set aside the decision of the lower court on this ground.
In response, learned counsel for the Respondent submitted that there was no valid tenancy agreement between the parties upon which the Appellant could rely, and consequently, no valid arbitration clause could be said to exist. He argued that the letter in question, upon which the Appellant based its claim, was authored by a solicitor acting entirely without the knowledge, consent, or authority of the Respondent. Having expressly repudiated and disclaimed the said letter through subsequent communication, the Respondent could not, in law, be bound by its contents, nor could the letter be elevated into the status of a tenancy agreement capable of conferring rights and obligations on either party. Counsel further argued that even if it were assumed that an arbitration clause was contained in the said letter, the jurisdiction of the court was not thereby ousted. The Appellant, by filing pleadings, actively participating in the trial, and failing to make a timely application for stay of proceedings pending arbitration, had effectively waived any right to insist on arbitration. By voluntarily submitting to the adjudicatory processes of the court, the Appellant was deemed to have accepted the court’s jurisdiction and could not, at a later stage, seek to rely on an arbitration clause as a shield against the outcome.
The Respondent’s counsel further emphasised that the existence and validity of the alleged agreement itself was the very subject of dispute between the parties. In such circumstances, it was for the court, and not an arbitral tribunal, to first determine whether a valid and enforceable contract had ever come into existence. Until that threshold question was resolved, no arbitral tribunal could assume jurisdiction. He therefore urged the Court to uphold the decision of the trial court, affirming that the purported tenancy agreement and its arbitration clause were nullities, and that the Appellant, by its conduct, had properly submitted to the jurisdiction of the court.
DECISION OF THE COURT
In resolving this issue, the Court of Appeal held that:
Where a party takes steps in a court proceeding beyond merely applying for a stay of proceedings, such a party is deemed to have waived the right to insist on arbitration. The Court explained that the law draws a clear distinction between a party who, at the earliest opportunity, applies for a stay of proceedings pending arbitration, and a party who, by filing pleadings, joining issues, and participating in the trial, elects to submit to the jurisdiction of the court. The latter, the Court held, cannot later turn around to question the court’s jurisdiction on the basis of an arbitration clause. The Court stressed that an arbitration clause in a contract does not, in itself, oust the jurisdiction of the courts of law. At best, it constitutes a contractual mechanism by which parties may choose to resolve disputes privately, and it affords the court a discretionary power to stay proceedings where the clause is contained in a valid and binding agreement. However, where no valid agreement exists as in the instant case, the clause is inoperative and incapable of binding the parties.
Accordingly, the Court of Appeal held that the Appellant could not rely on the arbitration clause to challenge the jurisdiction of the trial court. The appeal was therefore dismissed, and the judgment of the lower court was affirmed.
Issue resolved in favour of the Respondent
John Okoriko Esq for the Appellant
C. I. Okolo, Esq for the Respondent
This summary is fully reported at (2025) 8 CLRN in association with ALP NG & Co.
See www.clrndirect.com ; www.alp.company.
