[2023] KEHC 25602 (KLR)

Chesikari Investment Ltd v Royvin Company Ltd & 2 others (Civil Appeal 001 of 2020) [2023] KEHC 25602 (KLR) (16 November 2023) (Judgment)

Neutral citation: [2023] KEHC 25602 (KLR)

Republic of Kenya

In the High Court at Kabarnet

Civil Appeal 001 of 2020

RB Ngetich, J

November 16, 2023

Between

Chesikari Investment Ltd

Appellant

and

Royvin Company Ltd

1st Respondent

Gibb Africa Ltd

2nd Respondent

Guangxi Hydro Construction Bureau

3rd Respondent

(Being an appeal arising from a Ruling and Decree of the Honourable John Lolwatan Tamar, Principal Magistrate at Eldama Ravine, in Eldama Ravine CMCC NO. 32 OF 2020 dated and delivered on 20{{^th}} August,2020)

Judgment

Background 1. The Appellant herein instituted a suit against the Respondents vide a plaint filed on the 19th June,2020 accompanied by a Notice of Motion Application filed on the same date seeking injunctive orders against the Respondents. The 1st and 2nd Defendants filed a preliminary objection dated 2nd July, 2020 and the 3rd Defendant filed a preliminary objection dated 28th July, 2020 the main issues or points of law raised were: -a.The Jurisdiction of the court to entertain the dispute.b.The absence of a resolution of the Plaintiff Company authorizing the institution of the suit.c.Privity of contract between the 2nd Defendant and the Plaintiff.

2. On the 20th August,2020, the trial court upheld the two preliminary objections dated 2nd July,2020 and 28th July,2020 and struck out the suit with costs. Consequently, the Plaintiff/Applicant filed a memorandum of appeal on the 9th September,2020 and a Record of Appeal on the 23rd February,2023.

3. The Appellant felt aggrieved by that ruling and preferred this appeal raising the following summarized grounds as hereunder: -i.Whether the learned Magistrate erred in law and fact by holding that the trial court did not have jurisdiction to entertain the parties based on the existence of clause 15. 1 of the Agreement dated 1st March,2020. ii.Whether the Learned trial magistrate erred in law and fact by failing to appreciate Order 46 of the Civil Procedure Rules and refer the matter to arbitration as indicated under clause 15. 1 of the said agreement.iii.Whether the Learned trial magistrate erred in law and fact by failing to appreciate that the matter proceeded by way of Preliminary Objection which is purely on matters of law and not facts.iv.Whether the Learned Trial Magistrate erred in law and fact by finding that the Appellant/ Plaintiff did not have authority to sue on behalf of the Company.v.Whether the learned trial magistrate erred in law and fact in holding that the 2nd Defendant/Respondent was not privy to the agreement and that he was wrongly enjoined as a party.vi.Whether the learned trial magistrate erred in law in failing to consider and take into account the averments raised in the plaint and prayers sought therein touching on pertinent and substantial points of law and facts so as to arrive at a just and fair decision.

4. The Appellant seeks the following orders:-i.That the Ruling/Decree of the Honourable Court dated 20th August,2020 be reviewed.ii.That the Appellants suit be reinstated and thereupon referred to arbitration under the civil procedure Rules and returned to court for the trial of the balance of the claim.iii.That costs of the Appeal be borne by the Defendant.

5. The appeal was canvassed by way of written submissions.

Appellant’s Submissions 6. The Appellant filed written submissions on the 20th July,2023. On whether the trial had jurisdiction to entertain the matter, the appellant submitted that the Plaintiff/Appellant and Defendant/Respondent executed agreement dated 1st March, 2020. That in the agreement executed clause 15. 1 provide for arbitration clause; and a dispute arose on 2013/2020 when it came to the attention of the Appellant that the 3rd Defendant/Respondent had issued a similar contract to the 1st Defendant/Respondent without their contract being terminated.

7. That the trial court interpreted Clause 15. 1 to mean that the first port of call in the event of a dispute would be arbitration in the first instance and parties were bound by contract to refer the matter to arbitration and the courts have always respected the parties' choice of forum for resolution of conflict arising from contractual obligations; that it was a jurisprudential policy for courts to encourage parties to exhaust alternative dispute resolution mechanisms where they have been provided for.

8. Counsel argue that Clause 15 of the Contract executed on the 1st March 2020 encompasses provisions for settlement of disputes arising from the aforesaid contract and quoted Clause 15. 1 which reads as follows:“During both parties' execution of this Agreement, if a dispute occurred, it shall be settled through friendly consultations, if they still cannot reach an understanding or agreement after friendly consultations within 60 days, any party may submit the arbitration through local court as a final ruling, binding on both parties.”

9. That a basic reading of Clause 15. 1 of the Agreement connotes that when the parties come to a disagreement as to matters concerning the Agreement, they are to have friendly consultations within 60 days and if the parties do not come to an agreement, any of the parties would move to arbitrate the matter through the local courts to acquire a final ruling that would be binding on the parties.

10. That the Plaintiff/Appellant gave friendly consultations a chance and when the 3rd Defendant failed and/or neglected to pursue negotiations within 60 days. The Plaintiff/Appellant issued a demand letter addressed to the 3rd Defendant on the 27th May 2020 but the same did not attract any response which prompted the institution of a suit against the Defendants vide a Plaint filed on 19th June 2020, approximately 90 days after the dispute arose. This is after 60 days as recommended and consented to by the parties at the time of execution of the aforesaid agreement.

11. That the suit was merited and the parties should have been granted an opportunity to arbitrate through the local courts and have a final ruling binding to the parties as recommended and consented unto by the parties in Clause 15. 1 of the said agreement.

12. As to whether the learned Trial Magistrate erred in law and fact by failing to appreciate Order 46 of the Civil Procedure Rules and refer the matter to arbitration as indicated under Clause 15. 1 of the said agreement, it is submitted that Order 46 Rule 1 of the Civil Procedure Rules provide as follows:“Where in any suit all the parties interested who are not under disability agree that any matter in difference between them in such suit shall be referred to arbitration, they may, at any time before Judgment is pronounced, apply to the court for an order of reference.”

13. That a reading of this provision connotes that for matters to be arbitrated through local courts, an order of reference has to be made by the court when the parties agree to arbitrate; and the Ruling striking out the suit effectively shut out the Appellant from ever pursuing their claim as the matter could not proceed directly to arbitration but could only be referred to arbitration by order of the court as agreed by the parties.

14. That the second limb of the aforesaid Clause 15. 1 of the Agreement grants the parties an opportunity to arbitrate their disputes through the local courts in the event that friendly consultations fail. The appellant submit that Order 46 of the Civil Procedure Rules bears the intention of the drafters of the contract in question in that if the parties would fail to come to an agreement after friendly consultations, then a party would move to have the matter arbitrated through local courts to have a final ruling that would be binding upon the parties.

15. It is submitted that Clause 15. 1 confers jurisdiction upon the Trial Court to refer the matter to arbitration through the local court to acquire a final ruling that would be binding upon the parties to the agreement as provided under Order 46 of the Civil Procedure Rules, 2010 and if the defendants/ Respondents were indeed interested in having the matter arbitrated the same should have been pursued under the provisions of Order 46 of the Civil Procedure Rules, 2010.

16. Counsel further submit the Plaintiff/ Appellant filed a suit seeking for injunctive orders against three Defendants. The 1st Defendant was the company that was issued with a similar contract after the Plaintiff was issued with a contract on the 1st March 2020, the 2nd Defendant was the site supervisor of the 3rd Defendant and the 3rd Defendant was the company that awarded the contracts to the Plaintiff and the 1st Respondent; and for the injunctive orders sought in the suit to be executed successfully, the 1st and 2nd Respondents had to be enjoined as parties so that court orders would be binding upon them; that all the Defendants/Respondents are relevant parties to this suit.

17. That the contract dated 1st March 2020 was executed and binding upon the Appellant and 3rd Respondent. The terms are only binding upon them and not the 1st and 2nd Defendants as they were not parties to the agreement and more specifically the arbitration clause. It is thus clear and evident that they could not be forced into arbitration as interpreted by court. It is submitted that the matter should have been referred to arbitration as per Order 46 of the Civil Procedure Rules so that all parties could be heard and a final ruling delivered to bind all parties.

18. As to whether the learned Trial Magistrate erred in law and fact by failing to appreciate that the matter proceeded by way of Preliminary Objection which is purely on matters of law and not facts, counsel argue that in Faustina Njeru Njoka v Kimunye Tea Factory Limited [2022] eKLR the court stated as follows:The legal provision on ways of opposing an application is Order 51 rule 14 of the civil Procedure Rules which provides that;“Any respondent who wishes to oppose any application may file any one or the following documentsa.A notice preliminary objectionb.Replying Affidavitc.A statement of grounds of opposition

19. Further in Mukisa Biscuit Manufacturing Co. Ltd -vs- West End Distributors Ltd (1969) EA 696 as to what constitutes a preliminary objection; the court stated as follows:-“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 had to be ascertained or if what is sought is the exercise of judicial discretion"

20. ln Faustina Njeru Njoka v Kimunye Tea Factory Limited [2022] eKLR, the court stated that:“A preliminary objection and grounds of opposition though means of opposing an application they are not to be used when one intends to deny allegations in an application. In my view a replying affidavit would best serve to deny issues raised in an application.

21. Counsel submit that a preliminary objection was raised on the fact that the Plaint filed on 19th June 2020 had no company resolution accompanying it and the Plaintiff thus had no authority to institute the suit. That the question of whether the Plaintiff Company had the authority to institute the suit is a fact that should be ascertained by court by production of evidence in support or to the contrary. That it is important to note that no evidence was adduced by the Defendants/Respondents to the effect that the Plaintiff had no authority to institute the aforesaid suit.

22. That it is evident that the preliminary objections raised issues that would warrant the court to scrutinize the pleadings and to call evidence to substantiate the veracity of the said averments and the preliminary objections fell short of the requirements as envisaged in the Mukhisa Case.

23. And since the matter proceeded by way of preliminary objection and not an application, the Plaintiff was denied an opportunity to produce the Company's resolution through a Replying Affidavit or Further Affidavit.

24. On whether the learned Trial Magistrate erred in law and fact by finding that the Appellant/Plaintiff did not have authority to sue on behalf of the Company, counsel submit that Order 4 rule 1(4) provides as follows:-“Where the plaintiff is a corporation, the verifying affidavit shall be sworn by an officer of the company duly authorized under the seal of the company to do so.”

25. It is submitted by the Appellant that the case of Leo Investments Ltd v Trident Insurance Company Ltd (2014) eKLR Odunga, J was in agreement with the decision of Kimaru J in the case of Republic vs. Registrar General and 13 Others Misc. Application No. 67 of 2005 [2005] eKLR where the court stated as follows:-“...such a resolution by the Board of Directors of a company may be filed at any time before the suit is fixed for hearing as there is no requirement that the same be filed at the same time as the suit. Its absence is therefore, not fatal to the suit.

26. And submit that the court misdirected itself in holding that the Plaintiff/Appellant did not have authority to sue on behalf of the Company. That from the averments above, it is clear that there is no requirement that a resolution should be filed at the same time as the suit.

27. That further, it has also been inferred that a' resolution by the Board of Directors of a company may be filed at any time before the suit is fixed for hearing and that its absence is not fatal to the suit.

28. The Appellant place reliance in the Court of Appeal in the case of Spire Bank Limited v Land Registrar & 2 others [2019) eKLR which also stated as follows:“...It is essential to appreciate that the intention behind order 4 rule 1 (4) was to safeguard the corporate entity by ensuring that only an authorized officer could institute proceedings on its behalf. This was to address the mischief of unauthorized persons instituting proceedings on behalf of corporations, and obtaining fraudulent or unwarranted orders from the court. The company's seal that is affixed under the hand of the directors ensured that they were aware of, and had authorized such proceedings together with the persons enlisted to conduct them. And where evidence was produced to demonstrate that a person was unauthorized, the burden shifted to such officer to demonstrate that they were authorized under the company seal. With this in mind, we dare say that the provision was not intended to be utilized as a procedural technicality to strike out suits, particularly where no evidence was produced to demonstrate that the officer was unauthorized."

29. And argue that Order 4 Rule 4 of the Civil Procedure Rules was not intended to be utilized as a procedural technicality to strike out suits.

30. On whether the learned Trial Magistrate erred in law and fact in holding that the 2nd Defendant/ Respondent was not privy to the agreement and that he was wrongly enjoined a party, the Appellant submits that in Helga Christa Ohany v lcea Lion General Insurance Company Ltd [2022] eKLR the court stated as follows:The trial Court supported this proposition by citing the Court of Appeal decision in the case of Aineah Liluyani Njirah v Aga Khan Health Services [2013] eKLR, quote in extenso. The Court stated that:"Privity of contract is a long-established part of the law of contract. In the earlier part of the last century, it was identified by Viscont Haldane LC as one of the fundamental principles of the English Contract Law. See Dunlop Pneumatic Tyre Co. Ltd v Selfridge & Co. Ltd The essence of the privity rule is that only the people who actually negotiated a contract (who are privy to it) are entitled to enforce its terms. Even if a third party is mentioned in the contract, he cannot enforce any of its terms nor have any burdens from that contract enforced against him.

31. Further in Helga Christa Ohany v icea Lion General Insurance Company Ltd [2022] eKLR the court stated:The above decision reiterated previous decisions of the Court of appeal concerning exceptions to the privity of contract rule, including Gakombe v Automobile Association of Kenya & Another (2006) eKLR which affirmed the English decision in Shanklin Pier Ltd V Detel Products Ltd (1951) 2QB 854, and in Kenya Women Finance Trust v Bernard Oyugi Jaoko & 2 Others (2018) eKLR. The Aineah Likuyani Njirah decision was followed in Karuri Civil Engineering (K) Limited v Equity Bank Limited [2019] eKLR where the Court of Appeal observed that:"In Aineah Likuyani Njirah vs Aga Khan Health Services (2013) eKLR, this court expressed that there are now many exceptions to the privity rule, both at common law and in the statute books One of the exceptions is the need to grant third parties the right to enforce a contract made for their benefit. In our considered view, the doctrine of privity of contract cannot be used to oust responsibility to a third-party beneficiary of a performance bond”

32. That the Plaintiff/ Appellant filed a suit seeking injunctive orders against three Defendants. They submit that the 2nd Defendant was the overall supervisor and site agent of the 3rd Defendant prior to the signing of the agreement executed on 1st March 2020.

33. Counsel further submit that upon the Plaintiff/Appellant making an application for the aforesaid contract to construct water kiosks in Baringo County, the same was issued to the Plaintiff with the approval of the 2nd Defendant (Refer to paragraph 7 of the Supporting Affidavit in page 21 of the Record of Appeal). After the Plaintiff had constructed 10 water kiosks, the 2nd Defendant/Respondent brought in another contractor to the site without terminating the contract that had been executed between the Plaintiff and 3rd Defendant on the 1st March 2020.

34. They submit that from the aforesaid, the 2nd Defendant is a relevant party to this suit and has a part to play in the ensuring that terms of the contract are complied with. That it is also clear that the 2nd Defendant has been given authority by the 3rd Defendant to advise on who or who should not be issued with contracts for construction of water kiosks.

35. The appellant place reliance in the averments expressed in Aineah Likuyani Njirah vs Aga Khan Health Services (2013) eKLR that the doctrine of privity of contract cannot be used to oust responsibility to a third-party beneficiary of a performance bond to submit that the 2nd Defendant's responsibility to the Plaintiff and 3rd Defendant bar them bring ousted out of their performance bond; and for injunctive orders sought in the Plaint to be successfully executed, it is necessary for the 2nd Defendant to be enjoined as a party to the suit so that court orders would be binding upon them. Thus the 2nd Defendant/Respondent is a relevant party to this suit.

36. As to whether the learned Trial Magistrate erred in law in failing to consider and take into account the averments raised in the Plaint and prayers sought therein touching on pertinent and substantial points of law and facts so as to arrive at a just and fair decision, the Appellant submits that Article 159 (2) (d) of the Constitution provide that Justice shall be administered without undue regard to procedural technicalities.

37. They place reliance in the case of Kenya Ports Authority v Kenya Power & Lighting Co. limited [2012] eKLR Mwongo - J defined procedural technicalities as:“Combining the meaning of these words, "procedural technicalities" may be described as those that more concern the modes of proceedings and the rules involved that regulate formality and processes rather than substantive rights under law. This may not be and all-encompassing definition, but I think people generally associate procedural technicalities with annoying structures and rules which hinder the achievement of substantial justice."

38. That Section 3A of the Civil Procedure Act provides:Nothing in this Act shall limit or otherwise affect the inherent power of the court to make such orders as may be necessary for the ends of justice or to prevent abuse of the process of the court.

39. That from the foregoing and the submissions under the previous limbs, they submit that the court failed to appreciate Article 159 of the Constitution of Kenya and Section 3A of the Civil Procedure Act and that the Trial Court had a duty to look at the alternative avenues available to the parties before striking out the suit.

40. That in its Ruling, the Trial Court failed to consider and the averments raised in the Plaint and prayers sought therein touching on pertinent and substantial points of law and facts so as to arrive at a just and fair decision.

41. They submit that the Trial Court failed to appreciate that the administration of justice should normally require that the substance of all disputes should be investigated and decided on merit and that errors should not necessarily deter a litigant from the pursuits of his right; that the Trial Court failed to appreciate that the spirit of the law is that as far as possible in the exercise of judicial discretion the Court ought to hear and consider the case of both parties in any dispute in the absence of any good reason for it not to do so; that the Learned Trial Magistrate failed to exercise judicial discretion to hear and consider the cases of both parties in the absence of any good reason not it not to.

42. The Appellant urges this court to review or set aside the Ruling and/or Decree issued on the 20th August 2020 and to reinstate the suit and thereupon refer the matter to arbitration under the Civil Procedure Rules and returned to court for the trial of the balance of the claim. That the costs of the Appeal should be borne by the Defendants/Respondents.

2Nd Respondent’s Written Submissions 43. The 2nd Respondent filed submissions on the 14th August,2023 and on whether the record of appeal filed and served herein is proper and deserving of this court’s attention the Appellant submitted that in the Record of Appeal filed herein dated 20th February,2020, the appellant has deliberately omitted the inclusion of the contract dated 1st March,2020. That Section 89 of the Appellate jurisdictions Act and order 42 Rule 13 of the Civil Procedure Rules, 2010 stipulates the documents to be included in the record of appeal.

44. They submit that the Appellant having omitted the Trial Court's pleadings in his Record of Appeal renders this Honourable Court bareness of the right tools and materials to use in determining this appeal.

45. That this court nevertheless appreciates that an appellate Court will not ordinarily interfere with findings of fact by the trial Court unless they were based no evidence at all, or on a misapprehension of it or the Court is shown demonstrably to have acted on wrong principles in reaching the findings.

46. They argue that the Appellant is not compliant with these sections and has not at the close of his case explained why documents that are so vital in aiding the success of his Appeal have been omitted from the record. The Court is clothed with the responsibility of ensuring compliance of these sections of the Law before granting the Appellant the opportunity to be heard and in the absence of the same, the Record of Appeal remains without merited and urged this court to strike out the appeal.

47. The Appellant cited the Court of Appeal in the case of Peter M. Kariuki v Attorney General [20141 eKLR where it was held that:“We have also, as we are duty bound to do as a first appellate court, to reconsider the evidence adduced before the trial court and revaluate it to draw our own independent conclusions and to satisfy ourselves that the conclusions reached by the trial judge are consistent with the evidence. “

48. In respect to record of appeal, that the Supreme Court of Kenya in the case of Bwana Mohamed Bwana v Silvano Buko Bonaya & 2 others [20151 eKLR held as follows at paragraph 41:-“Without a record of appeal, a Court cannot determine the appeal cause before it. Thus, if the requisite bundle of documents is omitted, the appeal is incompetent and defective, for failing the requirements of the law. A Court cannot exercise its adjudicatory powers conferred by law, or the Constitution, where an appeal is incompetent. An incompetent appeal divests a Court of the jurisdiction to consider factual or legal controversies embodied in the relevant issues "(Emphasis supplied).

49. Further in the case of Chege v Suleiman [1988j eKLR the court of appeal stated that the issue of failure to attach the decree is a jurisdictional point while stating as follows“But we concur positively in the submission of Mr Lakha that this is not a procedural but a jurisdictional point. Those holdings were founded on a proper interpretation of section 66 of the Civil Procedure Act which confers a right of appeal from the High Court to this Court from "decrees and orders of the High Court''. And those holdings were predicated on the fact that since the appeal could only lie against a decree or order, no competent appeal could be brought unless those decrees or orders were formally extracted as the basis of the appeal "

50. The 2nd Respondent urges this Honourable Court to find and hold that the Record of Appeal filed herein is defective for reasons advanced and contrary to the index page filed herein, the Record of Appeal filed herein is not numbered as required by Law hence cannot sustain these proceedings and urged this court to strike out the record of appeal with costs to the 2nd Respondent.

51. On whether the Trial Magistrate erred in law and fact by finding that the Trial Court did not have jurisdiction to entertain the matter, counsel submit that court did not have jurisdiction in view of Clause 15:1 of the Contract agreement dated 1st March 2020 which clearly stipulated the recourse available for parties in case of any dispute and submitted that a matter of judicial notoriety that a Court of Law cannot rewrite a contract between the parties; that the trial Court did not write the said contract which the Appellant has deliberately omitted from the Record of Appeal herein a clear indication that he is coming to this court with muddy hands to defeat justice.

52. That it is a longstanding principle of law that parties to a contract are bound by the terms and conditions thereof and that it is not the business of the Courts to rewrite such contracts and cited the case of National Bank of Kenya Ltd vs Pipe Plastic Samkolit (K) Ltd (2002) 2 E.A.503, (2011) eKLR the Court of Appeal at page 507 stated as follows: -“A court of law cannot rewrite a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved".

53. They submit that the Trial Court was right in finding that it lacked jurisdiction to entertain the matter and the Appellant's claim on this point therefore fails and has no footing and the same must be discarded to the nearest trash bin.

54. On failure to exhibit contract between the Appellant and the 2nd Respondent, they argue that the Appellant having deliberately omitted the inclusion of the said contract and the Pleadings in the Trial Court from his Record of Appeal, they are only left with the ruling of the Trial Court for interrogation and the Trial Court having had the benefit of perusing the Contract dated 1st March 2020 had no difficulty in finding that the said contract was only between Chesikari Investment Limited Party B AND Guanxi Hydroelectric Construction Bureu Kenya Company Party A. That the 2nd Respondent herein cannot therefore be dragged into the said contract by association.

55. Further the Trial Court even bashed the Appellant herein for omitting the Board Resolution authorizing the institution of the suit from his pleadings only to come to Court and invoke Article 159 of the Constitution and Section 3A of the Civil Procedure Act and use the same in this court to correct the wrongs.

56. On whether the Learned Trial Magistrate erred in law and fact by finding that there were no specific reliefs sought against the 2nd Respondent, they submit that the plaint does not show any prayers against the 2nd Respondent and so the Trial Court was right to find and hold so; and the Appeal filed herein lacks audience before this Honourable Court, it is wanting, frivolous, vexatious, lacks in both substance and should be dismissed with Costs and interests to the 2nd Respondent.

1St And 3Rd Respondent’s Submissions 57. The 1st and 3rd Respondents filed submissions and in submitting on whether the matter was properly before the court, they argue that the Contract between the Plaintiff (Chesikari Investment Limited) and Guangxi Hydroelectric Construction Bureau Kenya had an alternative forum chosen for dispute resolution under clause 15. 1; that the parties to the contract agreed to have arbitration as their first port of call for resolution of any dispute(s) arising therefrom.

58. They submit that arbitration is an alternative form of dispute resolution which is well anchored in our laws including the Constitution of Kenya, 2010 which enjoins courts to promote alternative forms of dispute resolution including reconciliation, mediation, arbitration and traditional dispute resolution mechanisms. Related provisions are also found in the Civil Procedure Act and Rules: section 59(c) of the Civil Procedure Act and rule 20 of Order 46 of the Civil Procedure Rules, 2010 enables courts to refer matters for resolution vide alternative forms of dispute resolution suo moto.

59. And where there exists other sufficient and adequate avenue or forum to resolve a dispute, as was the case here, a party ought to pursue that avenue or forum and not invoke the court process; and cited the case of Speaker of the National Assembly v James Njenga Karume (1992) eKLR, where the court of appeal stated that: -“...In our view, there is considerable merit in the submission that where there is clear procedure for the redress of any particular grievance prescribed by the constitution or an Act of parliament, that procedure should be strictly followed. We observed without expressing a concluded view that order 53 of the Civil Procedure Rules cannot oust clear constitutional and statutory provisions...."

60. They submit that Justice Luka Kimaru applied the same principle in Kenya Airports Parking Si-vices Ltd.& Another –vs- Municipal Council of Mombasa 2010 eKLR where he slated: -“It is in this court's view that where there exists an agreement with an arbitration clause, under the principle of separability of the arbitration clause, if a party to the agreement is of the opinion that the agreement is unlawful and therefore invalid, such view does not invalidate the arbitration clause in the agreement.

61. Counsel submit that the prohibition against resort to courts for resolution of disputes where alternative avenues exist is expressed by the exhaustion doctrine, and is a legal principle requiring parties to exhaust all locally available mechanisms for dispute resolution before resorting to courts and cited the case of Martin Kabubii Mwangi v County Government of Laikipia (2019) where the court held as follows:-“The exhaustion principle enunciated in precedents such as the case of Secretary, county public service & Another v Hulbhai Gedi Abdille (supra) does not permit an election as to the parts of a statute that one should rely on. Put another way, it removes discretion on the part of the litigant from choosing whether to follow the provisions or not. In this case the suit was filed before exhaustion of the remedy under the law, namely the provisions of section 77 of the County Governments Act, The Claimant ought to have appealed against his removal to the Public Service Commission before moving the court. The suit did not fall in the category of suits that can be entertained by the court. As he did not appeal as provided for in law, the suit is non-starter and is accordingly struck out with no order as to costs"

62. And submit that in this case, the appellant never made any attempt to settle the matter through arbitration and failed before approaching the court. Yet, in the agreement binding both parties, it had been agreed that the first step was to attempt arbitration in an effort to reach an amicable resolution of dispute, if any. Therefore, if that is not done then the matter is not ripe to be referred to court; and urged this court not to re-writing contracts willfully signed by consenting parties and thereby usurp the powers of other competent alternative means to deal with the matters in dispute as preferred by the parties to the contract.

63. On failure by plaintiff to file a resolution by the company's Board of Directors authorizing the institution of the suit against the 1st and 3rd defendants, they cited the case of Bugerere Coffee Growers Ltd. -vs- Sebaduca 1970 EA at 147 where while the court stated as follows while dismissing the case:-“When companies authorize the commencement of legal proceedings a resolution or resolutions have to be passed either at a company Board of Directors' meeting and recorded in the minutes."

64. Further the case of Affordable Homes Africa Limited vs Ian Henderson & 2 Others HCCC No. 524 of 2004, Njagi J where the court stated as follows: -“The upshot of these considerations is that in the absence of a board resolution sanctioning the commencement of this action by the company, the company is not before the court at all. For that reason, the preliminary objection succeeds and the action must be struck out with costs, such costs to be borne by the advocates for the plaintiff."

65. Further reliance is placed on the case of Bactlab Limited v Bactlab East Africa Limited & 5 others, HCCC No. 588 of 2011 (Nairobi), where Lady Justice Khaminwa in striking out the suit stated as follows:“In this [sic] circumstances it is my view that as at the time the plaint was filed there was no board of directors resolution to undertake proceedings. This suit was not authorized by the company....There was no authority to file suit or to represent the company.I therefore find that the suit was not authorized by the company and therefore I do strike it out with costs to be met by the said Mr Farah Mohamed Awad who was the mover of these proceedings.

66. It is their submission that the appeal in its entirety is without merit and they urge the court to uphold the ruling of the learned Magistrate and dismiss the appeal with costs to the 1st and 3rd Respondents.

Analysis And Determination 67. I have perused and considered the record of appeal together with submissions filed and wish to consider whether the trial magistrate erred in upholding the 2 preliminary objections.

68. On the issue of jurisdiction, parties submitted that parties clause 15. 1 of the agreement provided that in the event of a dispute, it shall be settled through friendly consultations and if they cannot reach an understanding or agreement after friendly consultations within 60 days, any party may submit to arbitration through local court as a final ruling, binding on both parties. The appellant argues that the trial magistrate should have granted parties opportunity to arbitrate through local courts.

69. Clause 15. 1 as quoted in paragraph 8 above is not clear in my view. It talks of friendly consultations within 60 days, and if no agreement is reached, any of the parties may submit to arbitration through local court. There is however no dispute that parties intended to go for arbitration if no agreement is reached through friendly consultation. The expected procedure would be for parties to select and agree on appointment of arbitrator and after delivery of Arbitral award, then the parties are required go to local courts to have the arbitral award adopted or to seek to set aside arbitration award on grounds set out in section 35 of the Arbitration Act 1995, Laws of Kenya or refusal of the award on grounds set out under section 37 of Arbitration Act 1995, Laws of Kenya. In essence, the law applicable is local law which in Kenyan situation is Arbitration Act of 1995.

70. The intention of the parties in the agreement is clear that they would attempt resolving any dispute that may arise through arbitration. The word of Clause 15. 1 did not seem clear. I also take note of the use of the word “may” in the contract. The lack of clarity aside, the referral to arbitration was not coached in mandatory terms. That being the case, in my view the court should not have taken the drastic step of striking out the suit but refer to arbitration as that was the intention of the parties. Section 59(c) of the Civil Procedure Act and rule 20 of Order 46 of the Civil Procedure Rules, 2010 gives powers to courts to refer matters for resolution vide alternative forms of dispute resolution suo moto.

71. There is no dispute that the applicable law herein is Arbitration Act 1995, Laws of Kenya. Section 6(1) of the Act is on stay of legal proceedings and it 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 otherwise acknowledges the claim against which the stay of proceedings is sought, 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; orb)That there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.”

72. In the case of Mt. Kenya university Vs Step Up Holdings (K) Limited (Civil Appeal No. 186 of 2013) held that in order to succeed, the law obligated the appellant to file the application seeking reference to arbitration simultaneously with the entry of appearance and thereafter take no further procedural steps in the matter.

73. In the case cited hereinabove, the appellant entered appearance, and then responded to the respondent’s application for injunction but did not file application seeking an order for reference to arbitration. The court of appeal found that the appellant’s response to the respondent’s application for injunction amounted to taking of a procedural step in the matter before the initiation of the reference process.

74. Similarly, in the case of Charles Njogu lofty versus Bedouin Enterprises Limited, Civil Appeal No. 253 of 2003 the court considered Section 6(1) and held that even if the conditions set out in paragraphs (a) and (b) are satisfied, the court would still be entitled to reject an application for stay of proceedings and refer the dispute to arbitration if the application to do so is not made at the time of entering appearance.

75. In view of the above, I find that the trial magistrate erred in striking out the suit instead of invoking the provisions of Civil Procedure Act and Rules and refer the matter to arbitration process.

76. However, though that may be the case, judicial reluctance to recognize ouster clauses is well demonstrated in a consistent line of cases such as Davis & Another Versus Mistry (1973) EA 463, PYX Granite Co. Versus Ministry of Housing & Local Government & Another (1958) 1 AII ER 625 just but to name a few.

77. Section 6 is specific at what point a dispute should be referred to an arbitrator which should not be later than the time when that party enters appearance or otherwise acknowledges the claim going by the decision of the court of appeal cited in the Mt. Kenya university (supra). A party who fails to comply with the provision of Section 6(1) loses his right to refer the matter to an arbitrator. This, therefore, in my considered view means that the court assumes jurisdiction from that point to hear the dispute between the parties notwithstanding the existence of an arbitration clause in the contract.

78. In such an instance, the arbitration clause cannot be said to have ousted the jurisdiction of the court to hear the matter. The court must rise to the occasion where a party fails to comply with an express legal provision which parties have voluntarily subjected themselves to, and in this regard, the timelines within which to invoke an arbitration clause as set out in the Arbitration Act.

79. On failure by plaintiff to file authority to institute suit on behalf of a company, order 4 rule 1(4) provides as follows:`Where the plaintiff is a corporation, the verifying affidavit shall be sworn by an officer of the company duly authorized under the seal of the company to do so.

80. It is submitted by the Appellant that the case of Leo Investments Ltd v Trident Insurance Company Ltd (2014) eKLR Odunga, J was in agreement with the decision of Kimaru J in the case of Republic vs. Registrar General and 13 Others Misc. Application No. 67 of 2005 [2005] eKLR where the court stated as follows:-“...such a resolution by the Board of Directors of a company may be filed at any time before the suit is fixed for hearing as there is no requirement that the same be filed at the same time as the suit. Its absence is therefore, not fatal to the suit.

81. In view of the fact that there is no requirement to file authority to institute suit together with the plaint but can be allowed to file before the matter is fixed for hearing, the absence of such authority at the time of filing suit is therefore not fatal to the suit. It was therefore premature for the court to dismiss strike the suit on that ground.

82. On whether the 2nd Respondent was wrongly enjoined in the suit before the trial court, the issue to be determined during trial.

Final Orders: -1. This appeal is hereby allowed.2. Ruling delivered by trial magistrate on 20th August,2020 is hereby set aside.3. The dispute between parties herein is referred to arbitration. Arbitration Act 1995, Laws of Kenya to be complied with.4. Costs to the Appellant.

JUDGMENT DELIVERED, DATED AND SIGNED IN OPEN COURT AT KABARNETTHIS 16TH DAY OF NOVEMBER 2023. RACHEL NGETICHJUDGEIn the presence ofKaranja – Court Asssistant.Mr. Matiri for AppellantMr. Akanga for 1st & 3rd Respondent.Ms Wanjiku for 2nd Respondent.