The Central District Council (CDC) has lost an appeal against a contractor they engaged in 2014 to build semi-detached houses in Palapye. The council will have to fork out a total of P2,887, 778, 98 plus interest and costs that was awarded to the building contractor, Krosswise Company, by the arbitrator.
The CDC had entered into a contract with Krosswire on November 28, 2014, for the sum of P5,938, 481, 92 but fired the contractor for failing to execute the works with due diligence.
Following the cancellation of the contract, the parties’ matter was heard by the arbitrator, John Carr-Hartley who then awarded the contractor the sum in the absence of the client.
The matter then reached the High Court where CDC lost again with costs. Aggrieved by the court’s decision, the council took the matter to Court of Appeal (CoA). In last week’s ruling, the CoA also showed no mercy to the council, dismissing the appeal saying CDC has itself to blame by not acting like a responsible litigant.
CoA Judge President, Ian Kirby said CDC was to blame for clear misapprehension on the part of the arbitrator that his communications faxed to them reached its office. “Right from the onset, CDC was informed by the Institute of Arbitrators that the arbitration had been instituted,” he said.
Kirby explained that the council had also received a letter from the arbitrator that he had been appointed in that capacity and thereafter it received the minutes of the preliminary meeting by which it was informed of the next step in the proceedings.
He said that the council instructed both the arbitrator and contractor that future communications should be conveyed to its office, but never made any enquiry when there was no further communication.
“When no further communications then reached CDC, despite the expiry of the crucial dates, a reasonable litigant in the position of CDC would have realised that something was amiss. That a responsible litigant would then have contacted the arbitrator or the contractor in which the problem would have been solved hence,” he said.
Kirby said if CDC had attended the hearing as scheduled, and if by then the statement of claim had still not been conveyed to them, the award would not have been given in its absence and without affording it an opportunity to present its answer to the contractor’s claim.
The judge said
“When there was no appearance on either of the occasions, he was entitled to infer that it was due to CDC’s lack of interest attitude towards the arbitration proceedings. Even with the benefit of hindsight, he would not be entirely wrong,” Kirby said.
Further, Kirby pointed out that even the CDC attorney rightly conceded that he could not think of any possible explanation why his client did not attend that meeting.
According to court papers, in 2014, the parties entered into a contract for the construction of semi-detached houses.
Trouble started soon after the commencement of the contract, when the council secretary came to the conclusion that the contractor had been failing to execute the works with due diligence.
In consequence, CDC cancelled the contract upon notice to the contractor who thereupon invoked the provision of clause 26. Clause 26 provides in broad terms that in the case of the dispute arising between the parties it has to be determined by the council secretary and that a decision by the secretary regarding the dispute would be final and binding “unless the contractor within 14 days of the receipts hereof by a written notice to the council secretary disputes the same in which case such dispute shall be and is hereby referred to arbitration”.
The decision by the council secretary was only communicated to the contractor on September 24, 2015 while the request by the latter to proceed to arbitration was only communicated to CDC by the contractor on October 13, 2015.
This gave rise to council’s first defence against the claim namely that the challenged decision by the secretary had become final and binding after 14 days.