[2023] KEHC 26568 (KLR)

Armstrong & Duncan v Elat Limited & another (Miscellaneous Application E072 & E636 of 2021 (Consolidated)) [2023] KEHC 26568 (KLR) (Commercial and Tax) (8 December 2023) (Ruling)

Neutral citation: [2023] KEHC 26568 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Miscellaneous Application E072 & E636 of 2021 (Consolidated)

FG Mugambi, J

December 8, 2023

Between

Armstrong & Duncan

Applicant

and

Elat Limited

1st Respondent

Agua Kenya Limited

2nd Respondent

Ruling

Background 1. The parties entered into an agreement dated June 20, 2020 for the design, construction and delivery of the Nakuru Integrated Development Project. A dispute ensued and the parties in accordance with the memorandum of agreement (MOA) resorted to arbitration for dispute resolution.

2. The arbitrator hon John Olago Oluoch was appointed as the sole arbitrator by the Chairman of the Chartered Institute of Arbitrators. On December 18, 2020 the final award was delivered against the applicant herein for the amount of Kes 20,524,272/= exclusive of interest and costs.

3. A number of applications have been filed but this ruling determines the applications of August 24, 2021 (the 1st application) and July 21, 2022 (the 2nd application). This is pursuant to the consent recorded in this court dated June 30, 2023.

Application dated 21st July 2022 4. This application seeks to arrest the ruling of this court that was previously scheduled for Friday July 22, 2022 so as to enable the applicant to obtain additional information from the arbitrator with respect to the identity of the respondents. The application is supported by the affidavit sworn by Samuel Patrick Kibuchi, an Advocate of the High Court of Kenya and seized of the conduct of the matter on behalf of the applicant.

5. The applicant takes issue with the identity of the respondents noting that the MOA, on which basis the dispute arose, was signed by Armstrong & Duncan, Elatt Limited and Agua Kenya Limited but the arbitration was filed by Elatt-agua.

6. It is the applicant’s case that Elatt Agua Limited/ Elatt Agua are both not a parties to the MOA, that the details on the arbitral award are therefore incorrect and the award itself defective as the said party was not a party to the MOA. The applicant in fact notes that the said Elatt Agua Limited was incorporated 8 months after the MOA was signed.

7. The application is opposed by the replying affidavit sworn by Ambassador Mwakai Sio, one of the directors of the 2nd respondent as well as Elatt-Agua Limited. Amongst other things the respondents confirmed having entered into a joint venture and formed Elatt-Agua Limited, which was duly incorporated.

8. The respondents also oppose the application on the grounds that this honourable court has no jurisdiction to delve into the substance of arbitral proceedings given the strictures of section 10 of the Arbitration Act. I am in concurrence with this submission and I dare to add that the role of the court in arbitration proceedings is only supervisory. For that reason, the jurisdiction of this court may only be invoked in very specific situations as stipulated in the Act. Section 10 of the Act provides as follows:“Except as provided in this Act, no court shall intervene in matters governed by this Act.”

9. There is vast jurisprudence on the subject but by way of example I refer to the decision in Synergy Industrial Credit LtdvCape Holdings Ltd, [2020] eKLR, where the Court of Appeal rendered itself as follows:“One of the significant features of the Arbitration Act is the principle of party autonomy, which entitles parties to have their disputes resolved by the forum and in the manner of their choice. For that very reason, the instances when the court may intervene in arbitral proceedings or interfere with an arbitral award are not at large; they are few and only those specified by the Act.”

10. This court also has expressed the same view in almost similar circumstances, in Geo Chem Middle EastvKenya Bureau of Standards, [2020] eKLR. The Learned Judge (Ochieng, J as he then was) stated as follows:“Regrettably, this Court does not have the authority to make an assessment on the merits of the arbitral award. The jurisdiction of the High Court, when called upon to set aside an award, is limited to what is permissible pursuant to section 35 of the Arbitration Act. Any other intervention by the Court is expressly prohibited by section 10 of the Act. I therefore decline the invitation to ascertain if there were any contradictions in the various aspects of the decision made by the arbitral tribunal.”

11. The truth is that this application does not deserve to be allowed for the very reasons that have been stated in the decisions that I have cited. The disparities in the names as they appear in the arbitral award and the enforcement of the arbitral award as opposed to the names in the MOA is an issue that was within the knowledge of the applicant during the proceedings and therefore a matter that should have been traversed during the arbitration.

12. In other words, nothing will be served by allowing the applicant more time to obtain proceedings or documentation from the arbitrator because this Court has no jurisdiction to go over the issues that the applicant raises. For these reasons this application cannot succeed.

Application dated 24th August 2021 13. This application is brought under order 40 rules 1,2 & 4, order 46, order 51 rule 1 of the Civil Procedure Rules 2010, section 1A, B and 3A of the Civil Procedure Act, section 7 and 35 of the Arbitration Act, articles 47,50 and 159 of the Constitution of Kenya 2010 and all enabling provisions of the law.

14. The application seeks the following orders:i.Spentii.Spentiii.Spentiv.That the honourable court be pleased to allow the applicant to file its application to set aside the final arbitral award of hon. John Olago Aluoch dated December 18, 2020 out of time and that the application herein be deemed duly filed in so far as it relates to the prayers to set aside the aforesaid arbitral award.v.That the honourable court be pleased to set aside the arbitral award of Hon. John Aluoch dated December 18, 2020. vi.That the court be pleased to issue any other or further orders and or directions as it may deem fit and expedient to issue.vii.That the costs of this application be provided for.

15. The application is supported by the grounds on the face of it and by the supporting affidavit sworn by Mwangi Murage, a director of the applicant on August 24, 2021. The applicant’s case is based on the fact that the applicant did not participate in the appointment of the arbitrator and that the proceedings were conducted ex-parte, without notice to the applicant.

16. The applicant further observed that the respondents withheld the award from it with an aim of ensuring that time would lapse before the applicant filed an application for setting aside the award. It was the applicant’s contention that the arbitral proceedings were against the applicant’s right to a fair trial and the applicant would stand to suffer irreparable financial loss if the orders sought were not granted. The applicant pleaded that the arbitral award dealt with a dispute that was not contemplated by or falling within the terms of reference to arbitration.

17. In its submissions the applicant observed that it was not notified of the sole arbitrator’s appointment and the subsequent arbitral proceedings. Further, the applicant submitted that the respondents had misrepresented themselves throughout the dispute resolution process as they had entered into the MOA as Elatt Limited and Agua Kenya Limited but later changed to Elatt Agua.

18. The applicant’s position was that by changing the identity at will, the respondent misrepresented itself. The applicant faulted the arbitrator for not formally calling a preliminary meeting and failing to make the award and its contents known to the applicant within good and reasonable time.

19. On whether the dispute was contemplated within the terms of reference, the applicant submitted that the MOA did not envisage a dispute where the proponent of the project did not settle the project manager’s fees. The applicant urged the court to allow the application for setting aside the award out of time.

20. The 1st respondent opposed the application vide a replying affidavit sworn by Wesley Kipkore on October 8, 2021. The 2nd respondent filed a replying affidavit dated October 12, 2021 sworn by Ambasador Mwakai Sio. The respondents filed joint submissions dated October 25, 2021. Briefly stated, the case by the respondents was as follows:

21. That the High Court’s jurisdiction was limited to applications for setting aside and enforcing an arbitral award by virtue of sections 35 and 36 of the Arbitration Act. The Act prescribed guidelines along which these should be done and the grounds for setting aside the award had not been proved. As such the court was functus officio.

22. That it is particularly not true as alleged by the applicant that the proceedings were riddled with fraud. All parties had submitted to the jurisdiction the proceedings, they all took part in appointing the arbitrator, both parties attended the proceedings and the award was issued on account of admission of liability by the applicant. The arbitration proceedings reflect that the managing director of the applicant was present and the allegation otherwise amounts to perjury.

23. It had taken more than one year for the applicant to approach the court to set aside the award. The issues that have been raised on the substance of the matters before the Hon. Arbitrator are not matters that this court has jurisdiction to entertain.

24. In conclusion of the process the award was issued and copied to all parties. The applicant was present during the enforcement proceedings and in fact filed a preliminary objection to the application for enforcement.

Analysis 25. I have carefully considered the pleadings and arguments made by the parties and the authorities relied on. The first issue is whether leave should be granted to allow the applicant to file the application to set aside the award out of time. The timelines for an application for setting aside an award are set out under section 35(3) of the Arbitration Act which provides that:“An application for setting aside the arbitral award may not be made after 3 months have elapsed from the date on which the party making that application had received the arbitral award, or if a request had been made under section 34 from the date on which that request had been disposed of by the arbitral award.”

26. The Courts are unanimous on the need for strict compliance with timelines prescribed by the Arbitration Act. The Court of Appeal in Ezra Odondi Opar v Insurance Company of East Africa Limited, KSC CA Civil Appeal No 98 of 2016, [2020] eKLR, observed that:“The requirement that an application for setting aside an arbitral award may not be made after 3 months from the date on which the award is received is consistent with the general principle of expedition and finality in arbitration. As the Supreme Court of Kenya recently noted in Nyutu Agrovet Limited v Airtel Networks Kenya Limited and Another, SC Petition No 12 of 2015 “the Arbitration Act, was introduced into our legal system to provide a quicker way of settling disputes” “in a manner that is expeditious, efficient…” while also observing that Section 35 of the Act, “also provides the time limit within which the application for setting aside should be made.”

27. Further, in Kenyatta International Convention Centre (KICC)vGreenstar Systems Limited [2018] eKLR the High Court (Sewe, J), held as follows:“Thus, there being no provision in the Arbitration Act for extension of time, it is to be understood that strict compliance with the timeline set out in section 35(3) of the Act is imperative, and comports well with the principle of finality in arbitration. Indeed, in the Anne Mumbi Hinga Case, the Court of Appeal proceeded to hold, in no uncertain terms, that Section 35 of the Arbitration Act bars any challenge even for a valid reason after 3 months from the date of delivery of the award. And, it is now well settled that the time of delivery and receipt of Award is equivalent to the date of notice by the Arbitrator.”

28. Relying on these decisions it is my finding that the Arbitration Act does not provide for extension of time to set aside an arbitral award.

Determination 29. The court is therefore bereft of the jurisdiction to determine the matter. This being my view, it would be superfluous to consider the merits of the applicant's notice of motion dated August 24, 2021.

30. In conclusion and for the avoidance of doubts, the applications dated July 21, 2022 and August 24, 2021 are both dismissed with costs to the respondent.

DATED, SIGNED AND DELIVERED IN NAIROBI THIS 8TH DAY OF DECEMBER 2023. F. MUGAMBIJUDGE