An application for stay of proceedings will fail where the applicant does not show readiness to submit the dispute to arbitration

UNITED BANK FOR AFRICA PLC v. TRIEDENT CONSULTING LTD.

SUPREME COURT OF NIGERIA

(OKORO; ABBA AJI; OGUNWUNMIJU; JAURO; AKOMAYE: JJSC)

FACTS
United Bank for Africa Plc (the Appellant) and Triedent Consulting Ltd., (the respondent) were parties to a written contract which provided that the Appellant could terminate the agreement upon notice to the Respondent, and that upon such termination, the Appellant would pay all monies due under the agreement. The contract also contained an arbitration clause requiring the parties to use their best endeavours to amicably resolve any dispute arising from the agreement, failing which the dispute would be referred to arbitration in accordance with the law. The Appellant subsequently terminated the contract and requested the respondent to submit all outstanding invoices for payment. The Respondent complied by submitting its invoices. Following a meeting between the parties, the Appellant asserted that the Respondent had already been overpaid for the work done under the agreement. The Respondent, however, took the view that certain words contained in the letter terminating the agreement, which the Appellant copied to a third party, were defamatory of it.

Aggrieved, the Respondent commenced an action against the Appellant at the High Court, claiming, among other reliefs, the sum of USD 489,168.45 as monies allegedly due and unpaid in respect of invoices submitted for work done under the contract. Upon being served with the originating processes, the Appellant applied for a stay of proceedings pending arbitration, relying on the arbitration clause contained in the agreement. Notably, the Appellant did not attach a notice of arbitration or any other documentary evidence evincing its willingness to arbitrate to the application. The Respondent opposed the application by filing a counter-affidavit and a written address. In its ruling, the trial court dismissed the appellant’s application for stay of proceedings.

Dissatisfied, the Appellant appealed to the Court of Appeal. The Court of Appeal held that held that the appellant failed to demonstrate its readiness and willingness to arbitrate as required under the law, a prerequisite for the grant of a stay of proceedings. Accordingly, the Court of Appeal affirmed the refusal to grant a stay of proceedings and dismissed the appeal. Further aggrieved, the Appellant appealed to the Supreme Court. One of the issues for determination was: Whether the court below was right to hold that before a stay can be granted pending arbitration, the party applying (the appellant in this case) must demonstrate unequivocally by documentary evidence its willingness to submit the dispute to arbitration.

ARGUMENTS
Learned counsel for the Appellant contended that the court below erred in law by imposing an unwarranted and extraneous requirement that the Appellant must adduce documentary evidence demonstrating readiness and willingness to arbitrate before a stay of proceedings could be granted. Counsel argued that where a valid arbitration agreement exists between parties and no step has been taken on the merits of the dispute, the court is bound to give effect to the agreement by staying proceedings and referring the dispute to arbitration. According to learned counsel, once these conditions are met, the court has no discretion to impose additional hurdles not contemplated by the parties’ agreement or the governing law. Counsel further submitted that the insistence on documentary proof of willingness to arbitrate amounts to rewriting the parties’ contract and undermines the sanctity of arbitration agreements. He argued that the mere filing of an application for stay of proceedings at the earliest opportunity is, in itself, a clear manifestation of an intention to arbitrate.

In his view, the Appellant satisfied all the requisite conditions by bringing the application promptly and before taking any steps on the substance of the dispute. Counsel maintained that the Appellant did not file any pleadings or take any procedural step that could be construed as a submission to the jurisdiction of the court on the merits. It was also argued that submission to arbitration is not a condition precedent to the court’s jurisdiction, nor is it a prerequisite for the grant of a stay of proceedings. Learned counsel contended that requiring prior correspondence or a formal notice evincing willingness to arbitrate elevates form over substance and defeats the objective of encouraging arbitration as an alternative dispute resolution mechanism. According to counsel, the court below therefore fell into grave error by refusing the stay solely on the basis of the absence of documentary evidence of willingness to arbitrate.

In response, learned counsel for the Respondent submitted that the applicable legal framework clearly envisages situations in which an application for stay of proceedings may be refused where sufficient reasons are not shown. Counsel argued that the grant of a stay pending arbitration is not automatic but is an equitable relief, which calls for the exercise of judicial discretion. He submitted that a party seeking such discretionary relief must place credible and convincing materials before the court to justify the exercise of discretion in its favour.

Counsel maintained that the Appellant failed to discharge this burden, as the affidavit evidence placed before the trial court was wholly inadequate and did not demonstrate any genuine or unequivocal readiness and willingness to arbitrate. He argued that the Appellant neither initiated any arbitral process nor communicated its intention to arbitrate to the Respondent before approaching the court. According to counsel, Nigerian courts have consistently required applicants for stay pending arbitration to show tangible evidence of willingness to submit to arbitration, and the Appellant’s failure in this regard was fatal to its application. Counsel urged the court to affirm the concurrent findings of the lower courts, contending that the Appellant had not shown any compelling reason to interfere with the proper exercise of judicial discretion in refusing the stay of proceedings.

DECISION OF THE COURT
In resolving this issue, the Supreme Court held that:
A party seeking a stay of proceedings pending arbitration is under a duty to demonstrate a genuine and unequivocal desire to submit the dispute to arbitration. The Court emphasised that a party seeking a stay of proceedings pending arbitration must provide credible documentary evidence demonstrating that it communicated to the other party its willingness to resort to arbitration in respect of the dispute. Such evidence should include details of the proposed arbitral process and a request for the other party’s ratification or approval.
The Supreme Court observed that it could never have been the intention of the draftsmen of the Act that an application for stay should be granted automatically or as a matter of course, without regard to the applicant’s genuine readiness to arbitrate. In the instant case, the Court held that the Appellant’s affidavit in support of its application for stay was entirely devoid of any material capable of persuading the lower courts that the Appellant was genuinely willing and ready to arbitrate. As a result, the Appellant failed to satisfy the requirements for the discretionary relief of a stay of proceedings, and the application was rightly refused.

Issue resolved in favour of the Appellant

Chima Okereke, Esq., Paul Omotosho, Esq. for the Appellant/Cross-Respondent
Francis Agunbiade, Esq. – for the Respondent/Cross-Appellant

This summary is fully reported at (2024) 3 CLRN in association with ALP NG & Co.
See www.clrndirect.com; www.alp.company.