[2022] KEHC 15066 (KLR)

Ceven Limited v Family Bank Limited (Miscellaneous Civil Application E567 of 2022) [2022] KEHC 15066 (KLR) (Commercial and Tax) (7 November 2022) (Ruling)

Neutral citation: [2022] KEHC 15066 (KLR)

Republic of Kenya

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

Commercial and Tax

Miscellaneous Civil Application E567 of 2022

DAS Majanja, J

November 7, 2022

Between

Ceven Limited

Applicant

and

Family Bank Limited

Respondent

Ruling

1. The Applicant has filed the Chamber Summons application dated July 28, 2022 made, inter alia, under section 35(2)(a)(iii), 3 and 4 of the Arbitration Act, 1995 (“the Act’’) seeking orders that the Amended Interim Award No. 1 (“Award No. 1”) and Interim Award No. 2 (“Award No. 2”) published on July 30, 2022 and July 22, 2022 (collectively “the Awards”) respectively be set aside and the Applicant be granted liberty to call its witnesses and present its case on merits. It is supported by the affidavit of its director, Henry Waweru, sworn on July 25, 2022 and opposed by the Respondent through the replying affidavit of its legal officer, Sylvia Wambani, sworn on August 18, 2022. The application was argued by way of written submissions.

2. By way of background, the Applicant (‘’Ceven’’) and the Respondent (‘’ the Bank’’) entered into a Vendor Agreement dated April 8, 2015 (“the Agreement”) for provision of electricity tokens. When a dispute arose, the parties invoked the arbitration clause and Mr. Kyalo Mbobu (‘’the Arbitral Tribunal”) was appointed to hear and determine the dispute.

3. The arbitration proceedings were adjourned on diverse dates. The hearing eventually took place on April 26, 2022 in absence of Ceven who filed an application dated May 31, 2022 seeking to reopen the hearing. The Arbitral Tribunal issued Award No. 1 allowing the application to reopen the case on condition that Ceven pays the Arbitral Tribunal costs assessed at Kshs. 1,742,652. 00 for previous adjournments, the Bank’s advocate costs of Kshs. 30,000. 00, Bank’s witness costs of Kshs. 30,000. 00 and the Arbitral Tribunal costs for the hearing of April 26, 2022 at Kshs. 75,000. 00 all to be paid within 14 days otherwise the order setting aside the proceedings would stand vacated.

4. Ceven did not comply with the orders. The Arbitral Tribunal issued Order for Directions No. 18 on July 8, 2022 which vacated the order to set aside the proceedings of April 26, 2022 due to the noncompliance. Ceven filed another application dated July 13, 2022 seeking to set aside the Order for Directions No. 18 and for extension of time within which to comply with the conditions imposed on it. The Arbitral Tribunal dismissed the application by Award No. 2.

5. According to Ceven, the hearing took place on April 26, 2022 in absence of its witnesses and legal representatives. It states that on that day its Director, Mr Waweru, was out of the country and was unable to send another advocate as the firm of advocates on record had made an application on April 25, 2022 to cease acting. Mr Waweru realized through the Hansard that the Bank had misrepresented Ceven’s claim which would lead to an incorrect determination by the Arbitral Tribunal if it is not given an opportunity to be heard. Ceven also states that the Arbitral Tribunal had given conditional orders where it was to pay costs within 14 days from the date of the Award No. 1 but failed to indicate that the costs were to be on an equal basis and it was unfair for it to be condemned to pay costs alone. Ceven further contends that the inability to pay the costs will prevent it presenting its case on its merits and that the timeline of 14 days given for compliance was very limited. It therefore urges the court to allow the application and set the Awards.

6. The Bank opposes the application on several grounds. It states that Ceven has not filed the Awards in court hence there is no cause before this court and that the awards are procedural orders which are not final hence there is nothing enforceable in the Awards.

7. The Bank submits that the Applicant is seeking to appeal against an interlocutory decision which is contrary to the Act and that it offends the doctrine of res judicata. The Bank’s position is that since the Arbitral Tribunal has not yet issued the final award, it is not functus officio and as such Ceven ought to wait until the delivery of the final award in order to challenge it. The Bank also states that Ceven cannot challenge the Awards in the same application.

8. The Bank denies the allegation by Ceven that it was not given an opportunity to be heard based on the chronology of events. It states that since the arbitration process began, the hearing was adjourned several times on account of Ceven for various reasons. The Arbitral Tribunal granted it a conditional order for payment of costs which was disobeyed. The Bank states that Ceven filed another application dated July 13, 2022 to set aside the Award No. 1 and for extension of time to comply with the payment of costs which was dismissed.

9. The Bank submits that the Arbitral Tribunal gave both parties an equal opportunity to present their case. That Ceven frustrated the hearing through numerous adjournments and applications hence the Arbitral Tribunal invoked section 26(e) of the Act, which entitles it to make orders in default, and hear the matter in absence of Ceven. It further exercised discretion to reopen the hearing on conditions which Ceven did not comply with. The Bank states that both parties agreed on the terms and conditions of the arbitration which bound them hence there has been no denial to access to justice as alleged.

10. From the application, deposition and arguments, the main issues for determination are whether the court has jurisdiction to issue the orders sought and if so, whether the Applicant has made out a case for the grant of orders sought.

Whether the court has jurisdiction to handle the matter 11. The starting point in any court is to establish whether or not it has jurisdiction since without it, the court has to down its tools (see TheOwners of the Motor Vessel “Lillian S”vsCaltex Oil (Kenya) Ltd (1989) KLR 1 and Samuel Kamau Macharia v Kenya Commercial Bank and 2others, SCK Civil Application No. 2 of 2011).

12. In arbitration matters, a court expressly derives its jurisdiction from the Act. The position under section 10 of the Act is that courts should not intervene in matters governed by the Act except where expressly provided. Section 32A of the Act goes on to state, “except as otherwise agreed by the parties, an arbitral award is final and binding upon the parties to it, and no recourse is available against the award otherwise than in the manner provided by this Act.’’ Under section 3 of the Act an “arbitral award” means any award of an arbitral tribunal and includes an interim arbitral award. It is not in dispute that the Awards subject of these proceedings are interim awards. However, for the purposes of the statutory definition they are arbitral awards and are treated accordingly.

13. Thus in matter concerning an award, the court derives its jurisdiction to intervene in section 35 of the Act which permits to the court to set aside an award on the grounds provided therein and in section 39 which permits appeals on questions of law where the parties have reserved such a right. The purpose of the restriction of court’s intervention is to protect the arbitration process which should be final and binding (see Nyutu Agrovet Limited v Airtel Networks Kenya Limited; Chartered Institute of Arbitral Tribunals-Kenya Branch (Interested Party) [2019] eKLR). I therefore find and hold that this court has jurisdiction to set aside the Awards.

Whether the Awards should be set aside 14. Ceven has invoked the court’s intervention in the application to set aside the arbitral award under section 35 of the Act which gives this court jurisdiction to hear the matter as far as setting aside the award is concerned. It states as follows:35. Application for setting aside arbitral award(1)……………………….(2)An arbitral award may be set aside by the High Court only if—(a)the party making the application furnishes proof—(i)that a party to the arbitration agreement was under some incapacity; or(ii)the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication of that law, the laws of Kenya; or(iii)the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or(iv)the arbitral award deals with a dispute not contemplated by or not falling within the terms of the reference to arbitration or contains decisions on matters beyond the scope of the reference to arbitration, provided that if the decisions on matters referred to arbitration can be separated from those not so referred, only that part of the arbitral award which contains decisions on matters not referred to arbitration may be set aside; or(v)the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless that agreement was in conflict with a provision of this Act from which the parties cannot derogate; or failing such agreement, was not in accordance with this Act; or(vi)the making of the award was induced or affected by fraud, bribery, undue influence or corruption;(b)the High Court finds that—(i)the subject-matter of the dispute is not capable of settlement by arbitration under the law of Kenya; or(ii)the award is in conflict with the public policy of Kenya.

15. The main ground in Ceven’s application is that it was not granted equal opportunity to present its case under section 19 of the Act which provides as follows:19. Equal treatment of the partiesThe parties shall be treated with equality and each party shall subject to section 20, be given a fair and reasonable opportunity to present his case.

16. Section 20 allows the parties to determine the rules of procedure to be followed. Section 20(1) provides that, “Subject to the provisions of this Act, the parties are free to agree on the procedure to be followed by the arbitral tribunal in the conduct of the proceedings.’’ Under the arbitration clause contained in the Agreement, the parties freely adopted Chartered Institute of Arbitral Tribunals (Kenya Branch) Arbitration Rules, 2020 (“the Rules’’) as the rules governing the arbitration proceedings. Rule 72 of the Rules empowers the Arbitral Tribunal to reopen the hearing on the following terms:72. The arbitral tribunal may, if it considers it necessary owing to the exceptional circumstances, decide, on its own initiative or upon application of a party, to reopen the hearings at any time before the award is made.

17. From the aforesaid provisions, it is clear that the arbitral tribunal has the power and discretion to re-open a hearing. This is the power the arbitral tribunal exercised when it issued the Awards. From the chronology of events and the Orders for Directions, Ceven’s Advocates sought several adjournments in the course of the arbitration on September 6, 2021, September 27, 2021, November 15, 2021, February 11, 2022, March 2, 2022 and March 25, 2022. All these adjournments were on the ground of unavailability of Ceven’s Counsel, request to file a further affidavit and an expert report. In each instance, the Arbitral Tribunal when granting these adjournments condemned Ceven to pay the costs. The Bank only sought an adjournment once on December 10, 2021 when it sought to replace the witness giving testimony on its behalf.

18. The hearing was set for April 26, 2022 but on April 25, 2022, Ceven’s Advocate applied to cease acting for it on grounds of lack of instructions. On the said April 26, 2022, according to Order for Directions No. 15, counsel for the Bank and its Head of Operations, Mr. Michael Murage, were present while Ceven representative was absent. The Arbitral Tribunal directed that it would proceed with the hearing in absence of Ceven Advocate since the date had been taken by consent of the parties through emails of April 14, 2022 sent by Ceven’s Counsel and the Bank’s Counsel to the Arbitral Tribunal and its response of letter dated April 14, 2022 confirming the date of April 26, 2022.

19. This hearing of April 26, 2022 is the main issue in contention. The Arbitral Tribunal invoked Rule 72 of the Rules in respect to the application dated May 31, 2022 and reopened the case subject to payment of the Arbitral Tribunal fees and costs for the Bank’s advocate and witness for the previous adjournments. Ceven did not pay for the costs and it sought an extension of time to enable it pay through an application dated July 13, 2022 which was dismissed.

20. The question for this court is whether the Applicant has made out a case in terms of section 35(2)(a)(iii) of the Act by furnishing proof that it was, “unable to present its case.’’ Looking at the evidence as a whole, the Arbitral Tribunal gave Ceven the opportunity to be heard despite the numerous adjournments. The Arbitral Tribunal considered the reason for failure by the Applicant to attend the proceedings despite being given an opportunity to attend. The Arbitral Tribunal then set aside the application on terms. It cannot therefore be said that the Applicant was not granted a fair opportunity to present its case. It is only after Ceven failed to comply with the orders that the Arbitral Tribunal issued Directions No. 18 and vacated the order to set aside the proceedings.

21. Under section 35 of the Act, the High Court can only set aside an arbitral award if the party making the application furnishes proof of the grounds for setting aside. Having consider the entirety of the evidence, I find and hold that the Ceven was given the opportunity to present its case but failed to do so as a result of its own default and non –compliance with the Arbitral Tribunal’s directions.

22. I dismiss the application dated July 28, 2022 with costs to the Respondent. The interim orders in force are hereby discharged. The costs are assessed at Kshs. 50,000. 00 only.

DATED AND DELIVERED AT NAIROBI THIS 7TH DAY OF NOVEMBER 2022. D. S. MAJANJAJUDGECourt Assistant: Mr M. OnyangoMr Irungu instructed by KMK Law LLP Advocates for the Appellant.Mr Thige instructed by Muri, Mwaniki, Thige and Kageni LLP Advocates for the Respondent