[2022] KEHC 15354 (KLR)

Atc Kenya Operations Ltd v Telkom Kenya Limited (Civil Suit E096 of 2022) [2022] KEHC 15354 (KLR) (Commercial and Tax) (11 November 2022) (Ruling)

Neutral citation: [2022] KEHC 15354 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Suit E096 of 2022

A Mshila, J

November 11, 2022

Between

Atc Kenya Operations Ltd

Applicant

and

Telkom Kenya Limited

Respondent

Ruling

Background 1. The Chamber Summons dated April 27, 2022was brought under section 6 of the Arbitration Act and Rule 2 of the Arbitration Rules, 1997; the Application was premised on the Affidavit of Wangechi Gichuki and the Applicant sought the following orders;i.That there be a stay of further proceedings in this matter pending arbitration.ii.That the suit be referred to an Expert and Arbitrator by the London Court of International Arbitration (LCIA) in accordance with the terms of the Master Site Licence Agreement dated 12/08/2014 Site Sharing Agreement datedNovember 25, 2009(the Tower Agreement)iii.The costs of this Application be provided for.

2. In response to the Application the respondent filed a Preliminary Objection dated the 23/05/2022 seeking to strike out the Chamber Summons that sought orders for stay and referral of the matter to arbitration.

3. The parties were directed to file and exchange Lists of Authorities and were invited to canvass the Preliminary Objection by making oral submissions. Hereunder is a summary of the parties respective submissions;

Applicant/objector’s Case 4. The objector submitted that a party is obligated by section 6 of the Arbitration Act to apply not later than the time when that party enters an appearance to simultaneously file the application for referral and stay of proceedings.

5. The defendant had filed an unconditional Notice of Appointment which was filed on 30/03/2022; the unconditional Memorandum of Appearance was filed on 25/04/2022 whereas the impugned application was filed on 11/05/2022 which was forty-one (41) days after the first Notice was filed and sixteen (16) days after entering the unconditional appearance.

6. The timelines tosection 6(1) of the Arbitration Act must be strictly adhered to and the objector’s contention was that the Chamber Summons was fatally defective and ought to be struck out. Further, article 159 of the Constitution could not be utilized to evade the provisions of section 6(1) of the Act.

7. The authorities relied on by the Objector were Charles Njogu Lofty v Bedouin Enterprises Ltd [2005] eKLR; China Sichuan Corporation for International Techno-Economic Co-operative (SIETCO) v Kigwe Complex Limited [2013] eKLR; and Samson Wisuve Ndiku v Raja Sujal & Anor [2021] eKLR.

Defendant/respondent’s Case 8. In opposing theobjection the defendant submitted that the provisions of section 6(1) were disjunctive and not conjunctive; in that the section allows for a referral to be made either at the time of entering appearance, alongside or before filing of the defence and the section does not impose timelines.

9. Reference was made to the case of Lavington Security Guards Limited v Kengen Company[2009] eKLR where the applicant entered appearance and then subsequently filed an application seeking to have the matter referred to arbitration; the court held that the Application was not incompetent as the applicant had not waived its rights to invoke the arbitration clause to have the matter referred to arbitration.

10. The respondent also made reference to the case of Africa Spirits Limited v Prevab Enterprises Limited [2014] eKLR; the applicant had simultaneously filed the Memorandum of Appearance alongside the defence and had filed a summons to refer the matter to arbitration. The court held that the fact of filing of defence at the same time with the appearance and summons for stay this did not impeach the summons and all the applicant was obligated to do was to bring the application promptly.

11. The other cases referred to were: Neelcon Construction Company Ltd v Kakamega County Assembly[2018]eKLR where the court held that the failure to ask for stay within the time allowed did not seal the fate of the defendant; the court invoked the provisions of article 159 of the Constitution and cured the timelines to have the matter referred to arbitration. In SBI International Holdings (Kenya) v KENHA[2020] eKLR the court in its decision interpreted section 6(1) and held that the section implies a defendant may apply for stay at the time of filing the Memorandum of appearance or at any time before any steps are taken to acknowledge the claim.

12. The defendant prayed for the dismissal of the Preliminary Objection with costs.

Issues for Determination 13. The court has considered the Preliminary Objection, the Chamber Summons and the oral submissions made by the parties and has framed the following issue for determination;

a.Whether the Preliminary Objection is merited?

ANALYSIS Whether the Preliminary Objection is merited? 14. The plaintiff herein has raised the preliminary objection against the application seeking for orders of stay of proceedings and referral to arbitration on the grounds that thedefendant was obligated to simultaneously file the Memorandum of Appearance with the said application. The defendant therefore having failed to adhere to the timelines as set out in section 6(1) of the Arbitration Act No. 4 of 1995 waived its right to apply and had acquiesced itself to the jurisdiction of this court. The plaintiff further contended that failure to so do rendered the application incompetent.

15. The defendant was of the view that while it had filed a Memorandum of Appearance it had not taken any further steps neither had it acknowledged jurisdiction of the court by filing a defence; that the section allowed for a referral to be made either at the time of entering appearance, alongside or before filing of the defence and that the section does not impose timelines. Therefore, it had not waived or vitiated its rights to make the application for stay of proceedings and referral to arbitration.

16. The section 6(1) of the Arbitration Act provides as follows: -“(1)A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or files any pleadings or takes any other step in the proceedings, stay the proceedings and refer the parties to arbitration unless it finds—(a)that the arbitration agreement is null and void, inoperative or incapable of being performed; or(b)that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.”

17. This court is alive to the legions of decisions onsection 6(1) of the Arbitration Act on the fact of filing the summons ‘not later than the time when that party enters appearance or otherwise acknowledges the claim against which the stay of proceedings is sought.’

18. But in the case of Niazsons (K) Limited v China Road & Bridge Corporation Kenya(supra) which decision has been described as forward thinking the Court of Appeal held that an applicant wishing to take benefit of the section is obliged to apply after entering appearance and before delivering any pleading as long as an application under section 6(1) of the Act is brought promptly; the court went on to hold that the court is obliged to consider whether the applicant had taken any steps in the proceedings other than the steps allowed by the section.

19. The Preliminary Objection raised by the plaintiff is on jurisdiction on whether the defendant has waived its right to invoke the Arbitration Clause to have the matter referred to Arbitration. It is trite law that a Preliminary Objection must raise a point of law based on ascertained facts that are not in dispute and not on evidence; whereby these facts when raised in the objection may result in the complete disposal of the suit. This was held in the renowned case of Mukisa Biscuit Manufacturers Ltd v Westend Distributors Ltd[1969] EA 696; where it was held as follows;“In the words of Sir Charles Newbold P, at page 701,...A preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion.”

20. This court is guided and associates itself with the Court of Appeal decision of Naizsons (supra) and going by the findings therein, the section permits a defendant to apply for a stay of proceedings or reference of the proceedings to arbitration either at the time of entering appearance or at any time before filing pleadings or at any time before taking any steps in the proceedings. All the defendant must do is to bring the application promptly.

21. Guided by the said decision this court is satisfied that the defendant herein entered appearance and before filing any pleadings or taking any further steps after sixteen (16) days had lapsed promptly filed the summons seeking stay of the proceedings and reference to arbitration. This court is further satisfied that the Application is not incompetent and that it is properly before the court.

22. The upshot is that the Preliminary Objection is found to be devoid of merit.

Findings and Determinations 23. For the forgoing reasons this court makes the following findings and determinations;i.The plaintiffs preliminary objection is found to be devoid of merit and it is hereby overruled;ii.Theplaintiff shall bear the costs of the preliminary objection.iii.Hearing on 23/02/2023 for Chamber Summons datedApril 27, 2022. Orders Accordingly.

DATED SIGNED AND DELIVERED ELECTRONICALLY AT NANYUKI THIS 11TH DAY OF NOVEMBER, 2022. HON. A. MSHILAJUDGEIn the presence of;Kahuri Njenga for PlaintiffNyaburi for DefendantCourt Assistant: LucyNjenga: Pray for Hearing date and 14 days to file response to Chamber Summons dated April 27, 2022. Nyaburi: Pray for Hearing Date.Court: Hearing for the Chamber Summons on February 23, 2023. Plaintiff/Respondent to file response within 14 days. Corresponding leave to defendant if new issues arise. Interim Orders extended.DATED SIGNED AND DELIVERED ELECTRONICALLY AT NANYUKI THIS 11TH DAY OF NOVEMBER, 2022. HON. A. MSHILAJUDGE