[2022] KEHC 257 (KLR)

Catholic University of Eastern Africa v Mohamed; Bookhouse International (Interested Party) (Miscellaneous Application E078 of 2022) [2022] KEHC 257 (KLR) (Commercial and Tax) (25 March 2022) (Ruling)

Neutral citation: [2022] KEHC 257 (KLR)

Republic of Kenya

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

Commercial and Tax

Miscellaneous Application E078 of 2022

DAS Majanja, J

March 25, 2022

Between

Catholic University of Eastern Africa

Applicant

and

Balala Mohamed

Respondent

and

Bookhouse International

Interested Party

Ruling

1. Introduction and backgroundThe Applicant (“CUEA”) and the Interested Party (“Bookhouse”) are currently involved in arbitration proceedings presided over by the Respondent (“the Arbitrator”). The dispute arose from a Partnership Agreement dated 6th September 2013 between CUEA and Bookhouse for provision of reprographic services namely printing, photocopying, scanning and binding within CUEA’s premises.

2. On 25th November 2021, in the course of CUEA’s hearing, CUEA, as the respondent in the proceedings, filed an application under a certificate of urgency seeking to re-open Bookhouse’s case, recall its witness for further cross-examination and re-examination respectively on account of apparently new material evidence. CUEA further sought leave to file an amended defence, a further list of witnesses, witness statements and list of documents in view of the new evidence. It also sought to stay the arbitration proceedings pending hearing and determination of that application. On 26th November 2021, the Arbitrator dismissed the application as he deemed it to be a means by CUEA to derail a fair hearing of the arbitral proceedings. The arbitrator invoked section 24(3) of the Arbitration Act that gives the arbitral tribunal powers to disallow amendment where there has been delay.

3. CUEA has now filed the Notice of Motion dated 28th January 2022 and made under Articles 22, 23, 25, 50, 159 and 259 of the Constitution seeking to set aside the Arbitrator’s ruling of 26th November 2021 (“the Ruling”). It also seeks an order that the Arbitrator recuse himself on the ground that his ability to proceed impartially with the process is questionable and that in the alternative, the court orders that Arbitrator considers the new evidence to be adduced by CUEA.

4. The application is supported by the grounds stated on its face and the supporting affidavit of Lorine Atsieno, CUEA’s Legal Officer sworn on 28th January 2022. It is opposed by the Arbitrator through his replying affidavit sworn on 4th February 2022 and by Bookhouse through the replying affidavit and further affidavit of Nickson Shyoso Whitehouse Mang’ong’o, its Managing Director, sworn on 9th February 2022 and 17th February 2022 respectively. Bookhouse have also filed Grounds of Opposition dated 9th February 2022. The application was canvassed by way of written submissions which are on record and the parties have advanced their respective positions.The application

5. CUEA faults the Arbitrator for failing to consider the merits of its application. It states that the Arbitrator prejudicially and prematurely closed its case without reference to it and directed the parties to file their submissions without giving due regard to the fact that the defence case was only at the cross-examination stage. CUEA thus avers that it was denied a fair trial and that the actions of the Arbitrator show extreme bias against CUEA and goes against the principles of natural justice and the Constitutional right to a fair hearing.

6. CUEA accuses the Arbitrator of descending into the arena of the dispute and constituting himself as an additional counsel for Bookhouse by prejudicially dismissing an unopposed application. CUEA claims that it stands to suffer gross violation of its constitutional right on account of inability to afford the Arbitrator’s costs if the orders sought are not granted.The arbitrator’s reply

7. The Arbitrator opposes the application. He depones that at all stages of the arbitral proceedings, he acted fairly, impartially independently, and without bias while affording both parties equal opportunity to ventilate their respective positions as required by section 19 of the Arbitration Act. He asserts that the Court does not have any jurisdiction to grant any of the prayers sought in the application due to sections 10, 20, 24 and 29 of the Arbitration Act, which provisions of law protect the sanctity of the arbitral process and prevent unwarranted interference by the court.

8. The Arbitrator avers that CUEA has not presented any evidence showing that he is incapable of proceeding with the arbitration impartially and independently and thatthe prayer of recusal as sought in the application is res judicata and has already been determined by this Court in Misc. Appl. No. E1142 of 2020, Catholic University of Eastern Africa v Bookhouse International and Balala Mohammed.

9. The Arbitrator restates that the order disallowing the re-opening of Bookhouse’s case was made pursuant to section 24(3) of the Arbitration Act andthe said provision does not allow any recourse to the High Court as that would make this Court a supervisor of the ongoing arbitration proceedings which would be contrary to section 10 of the Arbitration Act. He further states that owing to sections 59 and 60(1)(a) and (3) of the Evidence Act, the Arbitrator calls upon this Court to take judicial notice of the provisions of the Arbitration Act and the decision in Misc. Appl. No. E1142 of 2020. Bookhouse’s reply

10. Bookhouse opposes the application on the grounds that it violates sections 10 and 14 of the Arbitration Act. It further states that CUEA fails to appreciate section 24 of the Arbitration Act and the respective rules. Bookhouse contends that the application is intended to frustrate the arbitration process, lacks merit and should be dismissed.

11. Bookhouse contends that CUEA has not been supportive of the proceedings. It states that CUEA only made payment for purposes of obtaining proceedings after the close of the matter so as to access the proceedings and bring the application to the court and frustrate the arbitration proceedings.

12. Bookhouse further explains that CUEA has been frustrating the arbitration proceedings by resisting referral of the dispute to arbitration,resisting the appointment of an arbitrator and engaging in threats upon the appointment of the Arbitrator, expressly stating that it would not participate in the arbitration proceedings. It adds that despite being served with the Statement of Claim on 28th May 2019, CUEA refused and/or neglected and/or out rightly ignored to enter appearance and filed its statement of defence well over 24 months since the claim was instituted. Bookhouse further contends that CUEA referred the matter to this Court in Misc. App. No. E1142 of 2020 in a bid to frustrate the arbitration where the court dismissed the application.

13. Bookhouse’s states that when CUEA’s witness took the stand on 11th November 2021, CUEA subsequently failed to attend three tribunal sessions on 16th, 24th and 26th November 2021 leading to the Arbitrator closing the matter upon application by its counsel. Bookhouse avers that even though directions have been given on filing of submissions, CUEA has not filed its submissions but instead filed this application.

14. Bookhouse reiterates that the Arbitration Act is clear that the Court’s interference with arbitration cases is limited to only matters governed by the Act and that the application is in breach of section 14 of the Arbitration Act which provides for the procedure for challenging the Arbitrator. It further states that CUEA had on 9th September 2021 sought for a chance to file documents after the exchange of pleadings had closed and the same was allowed but it failed to file the said documents and that cross-examination conducted by CUEA was based on documents filed before the Arbitrator and Bookhouse closed its case thereafter.Analysis and determination

15. From the application and submissions, the main issues for determination are whether the Arbitrator’s Ruling ought to be set aside and whether the Arbitrator ought to recuse himself from the arbitration proceedings. Resolution of these issues is a matter of jurisdiction of this court to interfere with arbitral proceedings.

16. As has been stated and submitted by the Arbitrator and Bookhouse, the court’s intervention in ongoing arbitration proceedings is limited as section 10 of the Arbitration Act provides that, ‘Except as provided in this Act, no court shall intervene in matters governed by this Act’.

17. CUEA submits that its application is based on its right of appeal where it is challenging the Arbitrator’s Ruling and it cites the Supreme Court decision in Nyutu Agrovet limited vs Airtel Networks Kenya Limited SCK Petition No. 19 of 2016 [2019] eKLR where the apex court held that there could be legitimate instances where an appeal is merited. While this is true, the instant case is clearly distinguishable from the circumstances of an appeal referred to by the Supreme Court above. The right of appeal being referred to by the Supreme Court was within the context of section 35 of the Arbitration Act and not every other ruling of an arbitrator. It would be misleading and incorrect to interpret the Supreme Court’s decision in Nyutu (Supra) to mean that a party has an unfettered right to appeal against any decision or direction given by an arbitrator as that would be against section 10 aforesaid and the spirit and grain of the Arbitration Act. Even if I were to accept that CUEA has a right to appeal against the Arbitrator’s Ruling, the Supreme Court in Nyutu (Supra) cautioned that, “Courts must draw a line between legitimate claims which fall within the ambit of the exceptional circumstances necessitating an appeal and claims where litigants only want a shot at an opportunity which is not deserved and which completely negates the whole essence of arbitration as an expeditious and efficient way of delivering justice.”

18. I therefore agree with the Arbitrator that he had the power to decline the application before him owing to delay as provided for by section 24(3) of the Arbitration Act and further hold that the Ruling is not an appealable decision under the Arbitration Act.

19. The issue whether the Arbitrator ought to recuse himself is circumscribed by sections 13 and 14 of the Arbitration Act which provide that:13. Grounds for challenge(1)When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or independence.(2)From the time of his appointment and throughout the arbitral proceedings, an arbitrator shall without delay disclose any such circumstances to the parties unless the parties have already been informed of them by him.(3)An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality and independence, or if he does not possess qualifications agreed to by the parties or if he is physically or mentally incapable of conducting the proceedings or there are justifiable doubts as to his capacity to do so.(4)A party may challenge an arbitrator appointed by him, or in whose appointment that party has participated, only for reasons of which he becomes aware after the appointment.14. Challenge procedure(1)Subject to subsection (3), the parties are free to agree on a procedure for challenging an arbitrator.(2)Failing an agreement under subsection (1), a party who intends to challenge an arbitrator shall, within 15 days after becoming aware of the composition of the arbitral tribunal or after becoming aware of any circumstances referred to in section 13(3), send a written statement of the reasons for the challenge to the arbitral tribunal, and unless the arbitrator who is being challenged withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.(3)If a challenge under agreed procedure or under subsection (2) is unsuccessful, the challenging party may, within 30 days after being notified of the decision to reject the challenge, apply to the High Court to determine the matter.(4)On an application under subsection (3), the arbitrator who was challenged shall be entitled to appear and be heard before the High Court determines the application.(5)The High Court may confirm the rejection of the challenge or may uphold the challenge and remove the arbitrator.(6)The decision of the High Court on such an application shall be final and shall not be subject to appeal.(7)Where an arbitrator is removed by the High Court under this section, the court may make such order as it thinks fit with respect to his entitlement (if any) to fees or expenses or the repayment of any fees or expenses already paid.(8)While an application under subsection (3) is pending before the High Court, the parties may commence, continue and conclude arbitral proceedings, but no award in such proceedings shall take effect until the application is decided, and such an award shall be void if the application is successful.

20. From sections 13 and 14 aforesaid, a challenge against an arbitrator’s impartiality shall in the first instance be brought before the arbitrator and that it is only when an arbitrator rejects this challenge that a party can apply to this court for an appellate determination. CUEA’s application to this court as the forum of first instance in challenging the Arbitrator’s impartiality is an affront to section 14(2) of the Arbitration Act which is couched in mandatory terms. In the circumstances, I find and hold the court does not have jurisdiction to deal with the application for recusal of the Arbitrator. Having reached the conclusion that the court lacks jurisdiction, the court cannot proceed to determine whether in fact the Arbitrator was biased as alleged by CUEA.

21. Before I conclude this decision, I would be remiss if I did not comment on the fact that CUEA invoked the provisions of the Constitution. As I understand, it argument is that its right to a fair hearing and related rights have been violated by the Arbitrator’s action. In my view, recourse to Constitutional provisions to the exclusion of the provisions of the Arbitration Act does not assist CUEA. Arbitration is one of the modes of dispute settlement recognized by the Constitution and indeed under Article 159(2)(c), it is one of the form of alternative dispute settlement that the court is obliged to promote.

22. As regards the Arbitration Act, it is the parties themselves who have agreed that their dispute shall be resolved in the manner contemplated by statute. In the Nyutu Case (Supra) , Maraga CJ (as he then was) expressed the view, which I accept, that:[104]Arbitration does not deny access to the Courts. Courts are but one of the means of resolving societal dispute. The other modes of dispute resolution, as stated in Article 159(2)(c) include “reconciliation, mediation, arbitration and traditional dispute resolution mechanisms….” Every litigant has the right to choose which mode best serves his or her interests. As AM Gleen posited, “Parties enter into arbitration agreements for the very reason that they do not want their disputes to end up in court.” Once one has made that choice, one cannot be heard to claim that one’s right of access to justice has been denied or limited. As the United States’ Second Circuit of the Court of Appeal also stated in Parsons Whittemore Overseas Co Inc v. Société Générale de l'Industrie du Papier (RAKTA), “By agreeing to submit disputes to arbitration, a party relinquishes his courtroom rights … [including the appellate process] in favour of arbitration with all of its well-known advantages and drawbacks.’”

23. In light of the aforesaid dicta, I hold that CUEA, by voluntarily agreeing to resolve the dispute by arbitration, cannot evade the strictures of the Arbitration Act and is bound by its provisions.Disposition

24. In reality what the Applicant seeks is to appeal against the direction of the arbitral tribunal rejecting its attempt to amend its pleadings and directing the parties to proceed with submissions. It must now be clear that this court lacks jurisdiction to entertain the Notice of Motion dated 28th January 2022. It lacks merit and is accordingly dismissed with costs to the Respondent and Interested Party. The costs are assessed at KES. 50,000. 00 for each party.

SIGNED AT NAIROBID. S. MAJANJAJUDGEDATED AND DELIVERED AT NAIROBI THIS 25TH DAY OF MARCH 2022. A. MABEYAJUDGECourt Assistant: Mr M. OnyangoMr Kofuna instructed by Kairu Mbuthia Law LLP for the Applicant.Mr Rosanna instructed by Balala and Abed Advocates for the Respondent.Ms Kariuki-Oesi instructed by Ricar Advocates LLP for the Interested Party.