IN
THE MALAWI SUPREME COURT OF APPEAL
AT
BLANTYRE
MSCA
CIVIL APPEAL NO. 14 OF 2000
(Being
High Court Civil Cause No. 2418 of 1999)
BETWEEN:
INDUSTRIAS
METALURGICAS PESCAMONA
SOCIEDAD
ANIMANA
(IMPSA).....................................APPELLANTS
-
and -
HEAVY
ENGINEERING
LIMITED.............................RESPONDENTS
BEFORE: THE
HONOURABLE MR JUSTICE UNYOLO, JA
THE HONOURABLE MR JUSTICE
KALAILE, JA
THE HONOURABLE JUSTICE MSOSA, JA
Kainja, Counsel for the
Appellants
Katundu, Counsel for the
Respondents
Mbekwani (Mrs), Official
Interpreter/Recorder
J
U D G M E N T
Kalaile, JA
This is an appeal by Industrias
Metalurgicas Pescamona Sociedad Anomina (hereinafter referred to as IMPSA”)
against the decision of the High Court refusing to grant an order staying
proceedings.
The respondents, who are Heavy
Engineering Limited (hereinafter referred to as “Heavy Engineering) commenced
these proceedings against IMPSA for breach of contract. Subsequently, IMPSA, the appellants, filed
an application for stay of the proceedings pursuant to section 6(1) of the
Arbitration Act (Cap. 6:03) of the Laws of Malawi.
Section 6(1) of the Arbitration
Act provides that:
“If any party to an
arbitration agreement, or any person claiming through or under him, commences
any legal proceedings in any court against any other party to the agreement, or
any person claiming through or under him, in respect of any matter agreed to be
referred, any party to those legal proceedings may at any time after
appearance, and before delivering any pleadings or taking any other steps in
the proceedings, apply to that court to stay the proceedings, and that court,
if satisfied that there is no sufficient reason why the matter should not be
referred in accordance with the agreement, and that the applicant was, at the
time when the proceedings were commenced, and still remains, ready and willing
to do all things necessary to the proper conduct of the arbitration, may make
an order staying the proceedings.”
The hearing of the application in
the court below proceeded purely on affidavit evidence. According to the findings of the trial
Judge, each of the parties relied on a different document as providing for the
arbitration clause as the basis on which the proceedings were to be stayed.
IMPSA relied on Clause 36 of the
IMPSA General Conditions, whereas Heavy Engineering relied on Clause 50 of the
ESCOM/IMPSA Conditions of Contract.
Clause 36 of the IMPSA General
Conditions stipulated that:
“36.1. All disputes in connection with the present
Contract for the execution thereof
shall be settled friendly through consultation. In case no settlement can be reached through consultation, such disputes
shall be submitted to arbitration.
The arbitration shall
take place in Mendoza, Republica Argentina and will be conducted by the
Arbitration Institute of the Mendoza Chamber of Commerce in accordance with the
statutes of the said Institute.
The arbitration award
shall be final and binding on both parties. Neither party shall seek recourse to a law court or
other authorities for revising the decision.
The arbitration fee
shall be borne by the losing party unless otherwise decided by the said Institute.
In the course of
arbitration the present Contract shall be continuously executed by both parties
except the part of the present Contract which is under arbitration.
36.2. This subcontract is to be interpreted in
accordance with and its administration and performance governed by the laws of
the Republica Argentina.”
The IMPSA agreement was entered into between IMPSA and
Heavy Engineering and was dated 28th April 1997 as evidenced by the
letter issued by Heavy Engineering which was addressed to IMPSA and dated 8th
July 1997. This letter is marked Exhibit
SC.5 and is referred to in the affidavit of Mr Krishna Savjani, SC.
Whereas Clause 50.2 of the
ESCOM/IMPSA Conditions of Contract stipulated that:
“50.2. If at any time any question, dispute or
difference shall arise between the Employer and the Contractor in connection
with or arising out of the Contract or the carrying
out of the Works either party shall be entitled to refer the matter to be
finally settled by arbitration in accordance with the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by one or more arbitrators
appointed in accordance with those Rules, or by arbitration in accordance with
such other rules as are
specified in Part II.
The arbitrator(s) shall
have full power to open up, review and revise:
(a) any decision or instruction of the
Engineer referred to arbitration pursuant to Sub-Clause 50.1; and
(b) any certificate of the Engineer related to
the dispute.”
It should be noted that the
parties to this contract are ESCOM and Heavy Engineering. The Engineer is defined as TAMS Consultants
Inc, the TAMS Building 655 Third Avenue, NEW YORK, NY 10017, USA in joint
venture with Knight Piesold & Partners, Consulting Engineers, Kanthack
House, Station Road, Ashford, KENT, TN23 IPP, UK.
Lastly, the Memorandum of
Understanding (SC1), which is the connerstone of the numerous agreements cited
by both parties to these proceedings, states in part, that:
“BASIS OF MEMORANDUM OF UNDERSTANDING
1. Date:
14 March 1997
2. Participants:
Heavy Engineering
Limited of Kenya (HEL) represented by Mr Nayan Patel & Industrias
Metalrgicas Pescarmona Sociedad Anonima of Argentina (IMPSA) represented by Mr.
Sergio Carobene & Mr. Pedro Palmes
3. Subject:
Sub-Contracting of:
•
Manufacturing, Transport and Erection Works for the KAP 58 - Gates,
Stoplogs & Hoists for the Kapichira Hydro-electic Power Scheme for ESCOM -
Malawi
•
Erection works for the KAP 51 - Main Generators and Auxiliary
Equipment for the Kapichira Hydro-electric Power Scheme for ESCOM - Malawi
4. General
It is the intention of
this MOU that all conditions of Contract between IMPSA and ESCOM, as
applicable, will rule for these subcontracts and therefore copies of Tender
Documents for both contracts are handed to HEL.
Following Sub-contracts
will be made after Engineer’s Approval of this amount of Subcontracting.
...”
Let us begin by following the
argument for the appellants. Mr
Katundu’s argument was premised on the fact that the Memorandum of
Understanding (SCI) of 14th March 1997 should be read together with
document SC4 (namely, Clause 36 of
IMPSA General Conditions) which was dated 28th April 1997 and
delivered on 29th April 1997.
The Memorandum of Understanding was, in essence, an agreement to agree.
The relevant part of the
Memorandum reads: “Following sub-contracts will be made after the Engineer’s
approval of this amount of subcontracting.”
There was only
one agreement to
agree after the Engineer’s approval. After such approval, the parties were
totally free to agree whatever terms they desired.
The IMPSA General Conditions (Exhibit
SC4) were e-mailed to the respondents on 29th April 1997 as stated
in paragraph 5 of the affidavit of G D Kainja, who is Counsel for the
respondents, which was to the effect that:
“in addition to the said “SC3", the said covering letter of
“GDK2" stated as follows:
“KAPICHIRA
PROJECT,
PURCHASE
ORDER NUMBER 34863
ANNEX
I OF 28.04.97
1. APPLICABLE DOCUMENTS
THE FOLLOWING DOCUMENTS SHALL
GOVERN THE PRESENT SUBCONTRACT AND SHALL APPLY IN THE FOLLOWING ORDER. IN CASE OF DISCREPANCIES THE FIRST ONE IN
THE LIST WILL PREVAIL.
1.1 THE PRESENT SUBCONTRACT.
1.2 MEMORANDUM OF UNDERSTANDING SIGNED BETWEEN IMPSA AND HEL ON
MARCH 14, 1997 (MOU).
1.3 CONTRACT NUMBER KAP 58.
GATES STOPLOGS & HOISTS FOR THE KAPICHIRA HYDROELECTRIC SCHEME FOR
ESCOM, MALAWI (KAP 58) AND CONTRACT NUMBER KAP 51. MAIN GENERATORS AND AUXILIARY EQUIPMENT FOR KAPICHIRA.
1.4 IMPSA’S SUBCONTRACT GENERAL CONDITIONS (SGC).
...
5. PAYMENT TERMS
PAYMENTS SHALL BE DONE BY WIRE
TRANSFER AS DETAILED IN ITEM 10 OF THE MOU WITHIN 10 DAYS OF RECEIVING THE
RESPECTIVE PAYMENT FROM THE CLIENT.
ERECTION WORKS
WILL BE AS DETAILED IN CLAUSE 6
OF THE MOU. HOWEVER, RESOURCES THERE IN
DETAILED ARE ONLY INDICATIVE. HEL SHALL
PROVIDE RESOURCES, SUCH AS, MANPOWER, TOOLS, EQUIPMENT, ETC. ENOUGH TO MEET THE
SCHEDULE OF THE CONTRACT.
6. OTHER CONDITIONS
AS DESCRIBED IN DOCUMENTS
DETAILED IN ABOVE CLAUSE 1.”
Annex I (which is Exhibit “SC
3"), provides, in part, that:
“KAPICHIRA PROJECT,
PURCHASE ORDER NUMBER 34863 ANNEX 1 OF 28.04.97
6. OTHER CONDITIONS
AS DESCRIBED IN
DOCUMENTS DETAILED IN ABOVE CLAUSE I.
Counsel for the respondents
further argued that, in full knowledge of Exhibit SC 3 cited above and Exhibit
SC 4 (the IMPSA Subcontract General Conditions), the respondents did not make
any representations or protests to the appellants denying the validity or
applicability of the terms offered in Exhibits SC 2, SC 3 or, for that matter,
SC 4 of the Agreement.
Instead, the respondents
proceeded to write Exhibits SC 5 and SC 7.
Exhibit SC 7 was signed with Appolo Insurance describing the contract
with the appellants as having been entered into on 28th April 1997,
which was in compliance with Clause 15 of the Memorandum of Understanding. Exhibit SC 5 has as its heading “Your
Purchase Order Number 34863, Contract for Kapichira Hydroelectric Project”,
which was in accordance with Exhibit SC.3.
The same source also caused Standard Chartered Bank to write Exhibit SC
6 describing SC 3 as being the Contract Letter between the respondents and the
appellants.
Furthermore, it was stated for
the appellants that even if one accepts as true what the respondent was
claiming, that all terms had been agreed upon by the time the Memorandum of
Understanding was signed, the alleged subsequent introduction of new terms in
Exhibits SC 2, SC 3 and SC 4 can be deemed to be a variation of the terms
which, in full knowledge thereof, the respondents, without protest, proceeded
to impliedly accept by their conduct in commencing the performance of the
Contract.
Although in paragraph 7(a) of the
affidavit of Counsel for the respondents, it could be implied that because
Exhibit SC 4 was not signed by the appellants, then its terms are not part of
the Contract terms, and were not therefore accepted by the respondents, that
argument is not correct at law, as acceptance of terms can also be inferred
from conduct. These were the arguments
by Counsel for the appellants.
However, Counsel for the
respondents countered by saying that there was a Memorandum of Understanding
dated 14th March 1997 which was subject to approval and pricing and
that took place on 28th April 1997.
Therefore the document which was received on the 29th April
1997 cannot be part of the Contract.
In Counsel for the respondents’
opinion, this would exclude SC 4, namely, Clause 36 of IMPSA General
Conditions. This argument cannot hold
when one follows the well-reasoned presentation by the appellants on this
point. We find as a fact that Clause 36
of the IMPSA General Conditions is indeed part and parcel of the Contract
between the appellants and the respondents.
We see no point in pontificating on this particular ground of appeal,
especially since Heavy Engineering were not a party to the ESCOM/IMPSA
Conditions of Contract.
Again, Counsel for the
respondents tried to argue that according to Counsel for the appellants’
submissions, the application of the Memorandum of Understanding was limited to
Clauses such as 9, 10, 12, 13 and 15. Counsel
for the appellants easily demolished this argument by demonstrating that the
Memorandum of Understanding did not harbour any such limitations, since it
catered for all the limitations listed by Counsel for the respondents.
In short, we are satisfied that
Clause 36 of the IMPSA General Conditions is the clause that is applicable in
this matter.
Accordingly, the appeal is
allowed. The decision of the Court
below is consequently set aside. We
order that the action herein be stayed and that the matter be referred to arbitration
in accordance with the said Clause 36 of the IMPSA General Conditions.
The appellants shall have the
costs of this appeal.
DELIVERED in Open Court this 29th
day of May 2002, at Blantyre.
Sgd ......................................................
L E UNYOLO, JA
Sgd ......................................................
J B KALAILE, JA
Sgd ......................................................
A S E MSOSA,
JA