Headnote

Arbitration – Interpretation of contract – Multi-tier dispute resolution clause – Challenge of award on grounds of invalidity of arbitration – Meaning of agreement – Waiver of right to object

Summary of facts

The Petitioner brought a Property Appeal claim against the Respondent to ratify a DIAC arbitral award against the Respondent for the breach of a sale and purchase agreement. The Respondent argued that the arbitral award was void because the Petitioner had failed to seek an amicable agreement prior to commencing arbitration as required by the sale and purchase agreement. The Court of First Instance upheld the award but the judgment was overturned on Appeal because amicable settlement had not been sought before arbitration. In the Dubai Court of Cassation the Petitioner argued that the Court of Appeal ignored the fact that the Respondent failed to mention the requirement to try and amicably settle in the arbitration and had therefore waived that requirement. The Court of Appeal also ignored the fact that the Petitioner had written to the Respondent in an attempt to resolve the dispute amicably but the Respondent had no interest in doing so.

Held

The Court of Appeal’s decision was overturned.

The criterion for the construction of contracts is intentions and meanings, not words and form. If there is room for an interpretive construction of a contract, enquiry shall be made into the mutual intentions of the parties beyond the literal meaning of words, and guidance may be sought in so doing from the nature of the transaction, and the trust and confidence which should exist between the parties in accordance with the custom current in such dealings. Regard shall also be had, not to individual words to the exclusion of others, but to the general wording. While the trial court retains discretion to interpret the terms of contracts and agreements, it must discover the intent of the parties, having regard to the facts and circumstances of the case, provided that the language of the contract bears out the meaning imputed to it. In this case the agreement in question provided no guidance as to what constituted amicable settlement, nor were there any facts that allowed the Court of Appeal to determine whether such settlement was ever pursued. The fact that the Petitioner went to arbitration indicated that the parties failed to settle the dispute amicably. Further, the arbitral award itself stated that the Respondent had waived its right to state that the parties did not do their utmost to resolve the dispute amicably. It follows that the Respondent has also waived its right to assert that the Petitioner had proceeded to arbitration prematurely.

Judgment

The Petitioner appealed on 22 February 2015 to have the primary decision confirming the award upheld. The Petitioner argued that the Court of Appeal erred in declining to confirm the award on the ground that the Petitioner did not seek an amicable settlement and take the agreed steps before proceeding to arbitration. The Respondent has waived its argument before the arbitral tribunal that the arbitration was premature due to failure to pursue an amicable settlement (see arbitral award). The Respondent has accordingly waived its right to assert this defence, which the Court of Appeal has overlooked. The Court of Appeal further disregarded the fact that the Petitioner had written the Respondent in an attempt to resolve the dispute amicably but the Petitioner had no interest in doing so. Moreover, the Respondent did not contest the arbitration proceedings or their conduct. The Petitioner had maintained that the Respondent had no right to raise said defence, having already waived it, as noted earlier. Hence, the Respondent may not raise the defence again [Page141:] before the court seized of the request to confirm the arbitral award. However, the Court of Appeal failed to address or respond to the Petitioner’s defence which renders its decision flawed and fit to be quashed.

The Court of Cassation states that it is well settled in the Court of Cassation that according to Articles 258, 265(2) of the Civil Transactions Law, the criterion in (the construction of) contracts is intentions and meanings and not words and form. If there is scope for an interpretative construction of the contract, an enquiry shall be made into the mutual intentions of the parties beyond the literal meaning of the words, and guidance may be sought in so doing from the nature of the transaction, and the trust and confidence which should exist between the parties in accordance with the custom current in (such) dealings. Regard shall be had, not to individual words to the exclusion of others, but to the wording generally. It is further settled that while the trial court retains discretion to interpret the terms of contracts and agreements and terms in dispute, it must discover the intent of the parties, having regard to the facts and circumstances of the case, provided that the language of the contract bears out the meaning imputed to it.

The Court of Appeal quashed the Court of First Instance’s decision to confirm the arbitral award and declined to confirm same on the ground that the Petitioner failed to pursue an amicable settlement before proceeding to arbitration as per the sale and purchase agreement containing the arbitration clause and the steps that must precede the reference to arbitration. However, the sale and purchase agreement provides no guidance as to what such amicable settlement entails and contains no material facts to enable the Court of First Instance to determine whether or not the settlement was pursued. Moreover, the parties proceeded with the arbitration without the Respondent ever pointing out before the arbitral tribunal that the Petitioner had proceeded to arbitration directly without first attempting to reach an amicable settlement and use best endeavours to settle any dispute between the parties, as required by the sale and purchase agreement. This would indicate that the parties failed to amicably resolve their dispute. It should also be noted that Clause 14 of the arbitral award states that the Respondent has waived its objection to the fact that the parties did not do their utmost to resolve the dispute amicably which means that the Respondent has waived its right to assert that the Petitioner had proceeded to arbitration prematurely. The Court of Appeal failed to take this approach and its decision is thus flawed and will be quashed.