( The National Supreme Court )

Judges:

President

Hon Justice:  Shadia Hassan Alfaki               Supreme Court Judge

Member

Hon Justice: Inshirah Ahmed Mukhtar          Supreme Court Judge

Member

Hon Justice: Abdalazim Al Hag Mohamed   Supreme Court Judge

The Parties:

Company of Dairkut Punet Technology       Challenger    

v.

Company New zone Engineering                   Respondent 

No. C.C./2702/2017

Arbitration Act 2016, defense of arbitration clause, - when pleaded.

Principle:

The plea of an arbitration clause must be presented before answering, the substantive claim, otherwise the right to plead it will lapse.

Judgement

Judge: Shadia Hassan Al faki

Date: 1/4/2018

The Respondent raised the suit (No 1455/ 2016) before Khartoum East District Court, against the challenger ,stating that it did not pay the value added tax, which it is bound to pay according to the contract concluded between them, (value 7, 77,980) pounds. Because of its delay, the taxes Authority opened aopened a case of evasion of payment of taxes. It paid (4,032,935) pounds after settlement. It claimed that sum, in addition to fees and agreed costs of (200,000) pounds.The challenger presented his substantive defense and contested the claim of the Respondent. After commentating, the court fixed a session for hearing, which was later on postponed for seeking a settlement. On the fixed session the Advocate for defense, requested the amendment of his defense petition. He presented it including legal defenses of lacking jurisdiction, because of the presence of an arbitration clause and the contravention of Article (11) of the Company Law 2015 and Article (4/1/29) of the constitution of Khartoum Commercial court. After replay and comment, the Court of First Instance decided to dismiss the suitwith costs, because of the arbitration clause.This decision was appealed by the Respondent, and the Court of Appeal, revoked the decision and referred the suit to the Court of First Instance for hearing. The challenge was presented at the right time 28/11.2017 – 12/12/2017.And the value exceeded the sum decided by the Chief Justice and thus the challenge is formally acceptable. The summary of the reasons for the challenge are that the Court of Appeal relied in its Judegment on Article (9) of the Arbitration Act 2005, that law was repealed , and this makes its decision contrary to the law . It also ignored Article (9) of the Arbitration Act 2016, which is the applicable law, which stated that the defense must be made with answering the claim, and he present it at the time of answering the claim after amendment of its defense petition, which is accepted by the court and this acceptance makes it the first answer as seeing by the Court , and it decided in the matter of amendment of the defensepetition saying  that there wasno challenge in respect of the amendment,  and that Article (77) of the law of Civil Procedure permits amendment of the petitions , and asked for revoking the challengedjudgement and maintain the judgement of the Court of First Instance .After reviewing the papers this challenge is hopeless. Article (9) of the Arbitration Act 2016 provided that (The Court must quash the suit for lack of Jurisdiction,if  the defendant pleaded the presence of an arbitration agreement, before or with the answer of the claim, otherwise he is regarded as abandoning his right to plead the Arbitration clause. The challenger previously  presented his substantive defense anda session was fixed for hearing and in subsequent session he presented an amended petition including legal defenses one of which the plea of Arbitration clause, this plea is one of the pleas of formal procedure and has to be presented before dealing with the substance of the claim , otherwise the right to plead it lapses and the challenger by presenting his substantive plea , is regarded as dealing with the substance of the claim. and does not nullify this the acceptance of the petition of the amended defense by the Court of First Instance, because its object was presenting that legal plea and it which was presented subsequent to the First session in which the answer to the claim is made, and that defense cannot be regarded as presented with the answer to the claim , as provided for by Article (9) of the Arbitration Act 2016, and the Court of  First Instance ought not to permit the presentation of such defense because it is regarded as a new application and not an amendment to the First defense , which contained the substantive defenses only , and cannot be accepted at this stage after the substantive answer.

For these reasons I confirm the decision of the Court of Appeal as to its result and dismiss the challenge summarily.

Judge: Insharah Ahmed Mukhtar

Date: 20/4/2018

I concur and add, the formal defense or procedural or one relating to the procedures, if aimed at lengthening the hearing of the suit, or preventing it by a reason due to the jurisdiction of the Court or the procedures of the dispute, and the law provided for some of these defenses such as the, which as the plea of lack of jurisdiction or annulment of the petition. Or the defense of assignment and its rules. But the prevailing opinion is that the formal defenses are found in the law restrictively. There is nothing to prove that the legislator made such restriction. In addition if there is a particular way in which the characteristic of the formal defense is available, it is illogical not to regard it as such because the law does not give it this characteristic.

We see that the formal defense is distinguished for being subject to special rules relating to it. As the formal defenses must be made before dealing with the substance or making a defense of non - acceptance.

If the defendant made an application or a substantive defense, then this right to make formal defense lapses. The reason for this rule is to enable the litigants to make the formal defenses at any stage of the dispute this may encourage the litigant to wait to the nearness of the proceedings and raises the formal defense, so that time, and effort and costs are lost without benefit and the plaintiff is compelled to start his dispute from the beginning, after the proceedings already went so far.

The basis of this rule is not the implied dropping of the defense by talking about the substance, as the waiving of the right is not supposed.

The basis of this rule is the specifying of a particular incident, it is talking about the substance, which if realized the right of the defense lapses.

Resulting from this characterization the rule must be interpreted narrowly.

The realization of legal incident leads to the lapsing of the defense despite the will of the defense maker and the lapsing endure even if he did not know his right therein or the reason for creating this right. Any application or defense from the defendant pertaining to the substance is regarded as causing a lapse in the formal defense. After reviewing the proceedings we find that the challenger by his Advocate Mr. Islam Bakri Shalal applied for particulars for explaining the substance of the suit and the relation connecting the defendant with the Chinese company of Hawari for Technology, and the serial numbers of the contract mentioned in Para 3 of the petition and the serial number of the main contractor of the mentioned communications company in Para 3 of the petition. We reckon that these questions are relating to the substance of the suit, which means lapsing of his right to make formal defenses, even if he applied for amendment of his petition of defense which is based on the substance of the suit which he presented before, and which did not contain a formal defense or procedural one and this amendment does not help him.

Judge: Abdulazim Alhag Mohamed

Date: 21/5/2018

The final order:

The application shall be quashed summarily, according to Article (168) of the Law of Civil Procedure 1982 A.D

Shadia Hassan Alfaki

Judge of the supreme Court

President of the Circuit

24/5/2018