IN THE SUPERIOR COURT OF JUDICATURE
IN THE HIGH COURT (COMMERCIAL DIVISION)
ACCRA - A.D 2018
SAVANNA PRIDE LIMITED - (Plaintiff)
HANERGY GLOBAL SOLAR AND SAVANNA SOLAR LIMITED - (Defendants)
DATE: 28 TH NOVEMBER, 2018
SUIT NO: GJ 1747/16
JUDGES: HIS LORDSHIP ERIC KYEI BAFFOUR JUSTICE OF THE HIGH COURT
By leave granted the Plaintiff for the issuance of the writ and service of a notice thereof out of the jurisdiction on 1st defendant, a company ordinarily resident outside the jurisdiction in compliance with Order 2 Rule 7(5) and Order 8 of the High Court (Civil Procedure) Rules, C. I. 47 the Plaintiff claim per its writ issued the following reliefs:
a. Immediate annulment of the Shares Sales and Purchase Agreement and abrogation of the shareholders agreement and immediate reverting of the 70% shares in Savanna Solar Ltd from the 1st Defendant to Plaintiff.
b. General damages for breach of the Shares Sales and Purchase Agreement.
c. Damages for fraud.
d. Compensation by 1st Defendant to Plaintiff.
e. Cost incidental to litigation
Defendants/Applicants seek by this motion to stay proceedings in court pending reference of the matters in dispute for determination in the parties own choice of an arbitral forum. In the affidavit deposed to in support of the application for suspension of the judicial proceedings in favour of arbitration it has been claimed that per an agreement entered into between the parties, the Plaintiff agreed to transfer 70% of his shares in 2nd Defendant to the 1st Defendant. Defendants again sought leave to strike out paragraphs 3, 7, 9, 10, 12, 13, 14, 16, 17, 18, 19, 20, 22, 23(a) (b)(c) and 24 of the Plaintiff’s statement of claim as well as reliefs (a), (b), (c), (d) and (e) of the endorsement on Plaintiff’s writ of summons. Counsel for Defendants/Applicants, Agyen-Sampong, Esq whiles moving the motion sought leave to abandon the second leg of his application and accordingly the prayer to strike out certain portions of the writ and the reliefs would be deemed to have been abandoned.
The basis of the claim of Applicants for seeking for the suspension of the proceedings is based on clause 14:2 of the Agreement between the parties. The said clause 14 states as follows:
“Any dispute arising out of or in connection with this Agreement including any question regarding its existence validity or termination shall be referred to and resolved by arbitration in Singapore in accordance with Arbitration Rules of Singapore International Arbitration Centre (SIAC Rules) for the time being in force which rules are deemed to be incorporated by reference to this clause”
To Applicant with the court acceding to the parties own preference for the settlement of the dispute the court will only be giving meaning to what the parties have expressed. Plaintiff/Respondent has resisted the invocation of clause 14:2 of the Agreement on the grounds that he has made allegations of fraud against the 1st Defendant in its acquisition of 70% shares of the 2nd Defendant Company. The claim of fraud is to the effect that 1st Defendant misrepresented its financial status to Plaintiff and that induced Plaintiff to off load 70% of its shares in 2nd Defendant to 1st Defendant. Plaintiff further alleges that 1st Defendant is facing a charge of ‘serious conflict of interest’ before the Hong Kong Securities and Futures Commission.
First, I fail to appreciate how even if there is a charge of ‘serious conflict of interest’ against 1st Defendant before the Hong Kong Securities and Futures Commission that becomes a bar to the enforcement of the agreement that the parties entered into more so when the charges Plaintiff claim 1st Defendant is facing is completely unrelated to the dispute between the parties herein. This ground is porous and cannot hold water and same is dismissed.
What is the nature of the fraud allegation being made by Plaintiff and is it the case that as far as a party resisting arbitration claim to have alleged fraud in his pleadings before the court, it automatically prevent the court from making orders staying proceedings and ties its hands from referring the issues to the parties preferred choice of an arbitral forum?
The fraud allegation is to the effect that there had been the presentation of fictitious financial statement that induced Plaintiff to enter into the Share and Purchase Agreement with 1st Defendant and that the presentation of the false financial statement has occasioned a loss of Ten Million Ghana Cedis to it. For the court to be precluded from referring the matter to arbitration then the issue must fall within the categories of matters that the law deems not to be arbitrable under section 1 of the Alternative Dispute Resolution Act, Act 798, which states that:
“This Act applies to matters other than those that relate to
(a) the national or public interest;
(b) the environment;
(c) the enforcement and interpretation of the Constitution;
(d) any other matter that by law cannot be settled by an alternative dispute resolution method”.
There is nothing of national or public interest in this matter nor is there anything regarding the environment nor are there issues or questions for the enforcement of the Constitution in this suit. Can the allegation of fraud therefore come within the omnibus sub section (d) of any other matter that by law cannot be settled by an alternative dispute resolution? It is my view that there is no blanket rule that states that as long as fraud is alleged the court is mandated to stay its hands from referring a matter to arbitration. As to whether or not a court will not refer the matter to arbitration based on allegation of fraud will depend on the circumstances and factors that are discussed infra. I proceed with the analysis that a provision in an agreement that calls for arbitration is separate and independent of the main agreement such that the arbitral clause is severable from the agreement between the parties. See section 3 of Act 798. That being so most progressive jurisdictions have taken the approach that when there is an allegation of fraud with regard to the main agreement, then the proper forum for determination of the dispute is arbitration. However, if the allegation of fraud is in respect of the arbitral provision such as an allegation that a party never intended to have any arbitral settlement of the dispute and such provision had been inserted on his blind side, then it is the duty of the court to determine such an issue.
In England early statutory laws and the interpretation of the courts prohibited arbitration in matters where fraud has been alleged by a party. See OVERSEAS UNION INSURANCE LTD v AA MUTUAL INTERNATIONAL INSURANCE CO LTD  2 LLOYD’S REP. 63. However, under the current United Kingdom Arbitration Act of 1996, any public policy consideration that prevented the courts from referring matters to arbitration because of allegation of fraud or any such public policy consideration is no longer the law. A remarkable departure was taken by the House Lords in the case of PREMIUM NAFTA PRODUCTS LTD v FILI SHIPPING CO. LTD (2007) UKHL 40 where the court was confronted with an allegation by the Plaintiff that eight charter parties that had arbitration provisions had been obtained by bribery and corruption. The issues for determination were ‘whether, as a matter of construction, the arbitration clause in the agreement is apt to cover the question of whether the contract was procured by bribery and second, whether it was possible for a party to be bound by submission to arbitration when he alleges that, had it not been for the bribery, he would never have entered into the contract containing the arbitration clause’.
The court per Lord Hoffman held that held in affirming a ruling of a reference to arbitration that as long as the arbitration clause is a separate agreement in itself, it is separable from the main contract and a court may refuse reference to an arbitration only unless the allegation of fraud is against the arbitration provision itself. This has long been the approach of several United States Federal Courts. In the case of PRIMA PAINT CORP. v FLOOD & CONKLIN MANUFACTURING CO (1967) 388 U.S. 395 where the question was presented as to whether it was the US Federal courts or an arbitrator that had the jurisdiction to resolve a claim of fraud in the inducement of the contract. It was the opinion of the court that first an arbitration clause as a matter of US Federal law (just like our own) was separable from the contract in which they were embedded and where no claim is made that fraud was directed to the arbitration clause itself, a broad arbitration clause would he held to encompass arbitration of the claim that the contract itself was induced by fraud. In MOSES H. CONE MEMORIAL HOSPITAL v MERCURY CONSTRUCTION CORP (1983) US 460 1 the principle was extended further when Brennan J held that questions of arbitrability must be addressed with a healthy regard for the policy favouring arbitration and that any doubt concerning the scope of arbitrable issues should be resolved in favour of arbitration, whether the problem at hand is the construction of the contract language itself or any claim to arbitrability.
See also ALLIED – BRUCE TERMINIX COS v DOBSON (1995) 513 US 265.
It must not be lost on any diligent reader of Act 798, that the underlying purpose and objective of the Act, among others, was to overcome the notion of the courts’ refusal to enforce agreements to arbitrate and the intent of the Act was to overcome the traditional hostility of the courts to give meaning to the preferred forum of the parties for the determination of their disputes. Parties for a number of reasons ranging from matters of neutrality, privacy, expertise, self –effacing and unobtrusive nature and efficiency of arbitration as well as the ready availability of legal services at the seat of arbitration may decide to have their disputes resolved in such a forum. Would a claim by Plaintiff/Respondent that concealment of the true financial position of 1st Defendant/Applicant that induced the contract of share transfer be within the contemplation of section 1(d) of Act 798 as among the categories of matters that cannot be settled by arbitration? I appreciate the subsection to encompass matters such as issues dealing with securities and exchange disputes, tax evasion, breach of a criminal provision of Ghana with an attendant incarceration or a fine that the criminal courts alone has jurisdiction to determine and the like.
The simple fact that an allegation of fraud in a civil matter under section 13 of the Evidence Act, NRCD 323 calls for proof beyond reasonable doubt would not necessarily divest an arbitrator of jurisdiction due to the reasons provided supra in terms of principle of separability of the main contract from the arbitration clause and two where the allegation of fraud is directed. If it is directed against the main contract, then it is the function of the arbitrator to deal with the claim except where the fraud is directed against the arbitration agreement that the court will assume jurisdiction to determine same. The reason is simple as whether a party agreed to arbitrate or not then becomes a preliminary question for determination which determination can only be made by a court. See section 3 of the Evidence Act, NRCD 323. The policy behind such approach of separability by the courts is obvious as to stop shout of fraud by a party resisting arbitration.
The courts exist not to draw agreements for parties but to give effect to the commercial purpose of the parties. Our function is to construct agreements as the parties, who are business minded intended. The courts will be doing commercial transactions and the emergence of Ghanaian commercial law no credit if it were to be applying capricious principles by not enforcing parties own voluntarily agreed terms in a contract. For the foregoing reasons, the application is granted as prayed. The court stays its proceedings and refers the matters alleged for settlement before the arbitral forum in Singapore as agreed between the parties.
I make no order as to cost.