[2022] KEHC 15224 (KLR)

Davidson & 4 others (suing as the Board of Trustees of Getrude’s Gardedns Children Hospital Staff Retirement Scheme) v Stanlib Kenya Limited (Miscellaneous Cause E595 of 2021) [2022] KEHC 15224 (KLR) (Commercial and Tax) (11 November 2022) (Ruling)

Neutral citation: [2022] KEHC 15224 (KLR)

Republic of Kenya

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

Commercial and Tax

Miscellaneous Cause E595 of 2021

EC Mwita, J

November 11, 2022

Between

Terry Davidson, Robert Nyarango , Thomas Nguiri , Josec Muchika & Josephine Rading (Suing as the Board of Trustees of Getrude’s Gardedns Children Hospital Staff Retirement Scheme)

Applicant

and

Stanlib Kenya Limited

Respondent

Ruling

1. By a notice of motion dated August 10, 2021 brought under section 10, 32A, 35(2)(b)(ii) of the Arbitration Act (the Act) and rules 7 and 11 of theArbitration Rules, (the rules), the applicants sought to set aside the arbitral award dated April 6, 2021 and published on May 11, 2021.

2. The circumstances giving rise to this application, as can be discerned from the grounds and affidavit, are that the applicants lodged a claim before the arbitrator for breach of contract and negligence with regard to in investing the applicant’s funds, following an investment management agreement dated July 23, 2004 and policy statement of February 2011.

3. The respondent filed a response to the claim and raised a preliminary objection that the claim was time barred. The applicants filed a reply to the response and preliminary objection denying that the claim was time barred. Parties agreed to dispose of the preliminary through written submissions a fact that was captured in the directions issued on November 24, 2021.

4. The arbitrator issued an award dated April 6, 2021 and published on May 11, 2021, upholding the preliminary objection and dismissed the claim with costs, leading to the present application.

5. The applicants assert that the arbitral award violated their right to a hearing, to have the claim heard and determined in accordance with the law, as guaranteed under article 50(1) of theConstitution. The applicants further assert that the award offended section 4(1) of the Limitation of Actions Act which recognizes that limitation based on contract is 6 years, thus making the award contrary to public policy.

6. The applicants state that the award offended article 46(1) of theConstitution and sections 2(2), 3(4), 13, 14 and 15 of the Consumer Protection Act.

7. The respondent opposes the application through grounds of opposition dated October 25, 2021 and a replying affidavit sworn on October 25, 2021. The respondent denies that the award offended theConstitution, the law or is contrary to public policy. The respondent takes the view that the applicant is appealing against the arbitral award contrary to section 32A of the Act in the guise of an application to set aside that award.

8. According to the respondent, the arbitrator heard both parties on the preliminary objection and, therefore, there was no breach of the right to hearing. The respondent maintains that the issue of misapprehension of the law on limitation of actions is a question of law that cannot be dealt with in the manner the applicants have moved the court. The applicants have also not established breach of public policy to successfully move the court under section 35(2)(b)(ii) of the Act.

9. The respondent again asserts that the application was been filed outside the three months allowed by law.

10. This application calls on this court to determine whether there was breach of the right to fair hearing, public policy and whether it was filed within time. I have considered the arguments and the decisions relied on by parties.

11. The application seeks to set aside the arbitral award on grounds that it offended theConstitution, the law and public policy. The argument put by the applicants is that by upholding the preliminary that the claim was time barred, the applicants were denied the right to fair hearing, in breach of article 50(1) of theConstitution.

12. The applicants rely on Richmond Metropolitan Authority v McDeviit Street Bovis Inc 42 Va Cir 243 (1997); Alpha Knits Limited & 2 others v Ruiru Municipal Council [2009] eKLR; Kenya Orient Insurance Limited v Oraro & Company Advocates [2014] eKLR and William Omar Owino v South Nyanza Sugar Company Limited [2019] eKLR.

13. On whether the application has been filed within time, the applicants argue in the positive. The applicants posit that the application was filed within three months after the receipt of the award as permitted by the law.

14. There is no denial that the arbitrator notified parties by letter dated April 6, 2021 that the award was ready for collection on payment of arbitral fees. The respondent paid its portion of the fee balance on April 19, 2021 while the applicants paid on May 4, 2021. The then arbitrator wrote to the parties on May 11, 2021 acknowledging payment of fees and informed them that the award was now ready for collection. It is for that reason that the applicants argue that the application was filed within 3 months as required by section 35(3).

15. The applicants rely on Dewdrop Enterprises Limited v Harree Construction Limited [2009] eKLR andUnited (EA) Warehouses Limited v Care Somalia and South Sudan [2015] eKLR on this issue.

16. The respondent asserts that the application was filed out of time. In the view of the respondent, parties were notified that the award was ready on April 6, 2021 when the time started running. Reliance is placed on Christ of All Nations v Apollo Insurance Company Limited (Nairobi HCCC NO 477 OF 1999) and University of Nairobi v Multiscope Consultancy Engineers Limited [2020] eKLR.

Whether application was filed on time 17. The first issue is whether the application was filed on time. The applicants argue in the affirmative that the application was filed on time while the respondent take the opposite view.

18. Section 35 (2) of the Act provides grounds under which the court may set aside an arbitral award, and sub section (3) gives the time line of three months within which an application to set aside an award should be made. It states: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

19. The subsection is clear that application to set aside an arbitral award has to be made three months after the award is received by the person making the application. The operative word here is 'from the date of receipt.' The date of receipt is the date when the three months-time begins to run.

20. Both parties agree that they were notified by the arbitrator on April 6, 2021 that the arbitral award was ready for collection on payment of his fees balance. The respondent paid its portion of the fees on April 19, 2021 while the applicants paid on May 4, 2021. On May 11, 2021, the arbitrator confirmed to the parties that fees had been paid in full and, therefore, the award was available for collection.

21. The applicants maintain that the award was published on May 11, 2021, the date on which parties were notified that fees had been paid in full and they could collect the award. The respondent on its part takes the view that the award was received the day parties were first notified that it was ready for collection on payment of arbitral fee balance.

22. The issue of when an award is deemed to have been published in not new and seems to have a divided opinion. In Dewdrop Enterprises Limited v Harree Construction Limited [2009] eKLR and United (EA) Warehouses Limited [2015] eKLR both of which the applicant relied on, the court took the view that the time of three months starts running from the date the applicant receives the award.

23. On the other hand, in University of Nairobi v Multiscope Consultancy Engineers Limited [2020] eKLR, which the respondent relies on, the court held that delivery happens when the arbitral tribunal either gives, yields, delivers, releases, or makes available for collection a signed copy of the award to the parties. The court emphasized that actual collection or receipt of the award by the party is not necessary.

24. A similar view was taken in National Housing Corporation v Custom General Construction Ltd [2021] eKLR that the date of receipt of the award is the date on which parties are notified that the award is ready for collection on payment of arbitral fees.

25. In Match Electricals Company Limited v Libyan Arab African Investments Company Limited & another [2021] eKLR, it was stated that 'received' for purposes of the Act means notification that the award is ready for collection irrespective of the date the award was actually collected or physically received by the parties or delivered by the arbitrator.

26. The position in all the latter decisions is that an arbitral award is deemed to have been received on the date parties to the arbitral proceedings are notified that the award is ready for collection.

27. I agree with this view and the reason is not far to seek. Parties are usually notified that the award is ready for collection on payment of the arbitrator’s fees, but they may not pay immediately. It may take time for parties to pay and collect the award. One of the parties may opt not pay all thus delaying collection of the award. That would invariably force the other part to pay all the fees in order to collect the award. Alternatively, none of the parties may pay all with the result that the award is not collected/released. The aggrieved party may even pay after several months or even a year after notification and come to court because that is the time the award is received. The date of receipt of the award after payment cannot, therefore, be taken as the date of receipt of the award.

28. Let us use the case at hand to illustrate the problem that would arise if the date an applicant receives the award was to be taken literally as the dated of receipt of the award. Parties were notified that the award was ready on April 6, 2019. Whereas the respondent paid on April 19, 2021, the applicants did not pay until May 4, 2021, almost one months after notification that the award was ready. On May 1, 2021, the arbitrator confirmed to the parties that fees had been paid, the date the applicants take to be the date the award was published. The applicants did not state when they received the award given that the section in the statute does not use the word from the date 'the award is published.'

29. I agree that for the section to make sense, the date of receipt of the award is the date parties are notified that the award is ready for collection. When payment is made has no relevance in computing time for purposes of applying to set aside the award.

30. In the case at hand, parties having been notified on April 6, 2021 that the award was ready for collection on payment of the arbitral fees, that was the date the award was deemed to have been received. And applying this view, to this case, there is no doubt that parties were notified on April 6, 2021 that the award was ready for collection. However, the application was brought on August 10, 2021 which was outside the three months allowed by statute. I agree with the respondent that the application was filed out of time.

31. Even if one were to be wrong on the time, was the applicants’ right to hearing violated?

32. The applicants have again argue that their right to a fair hearing was violated when the arbitrator allowed the preliminary objection that the claim was time barred, thus denying them an opportunity to have their case heard and determined on merit. The respondent maintains that both parties were heard when they argued the objection before the arbitrator following their agreement to have the objection determined first through written submissions.

33. Articled 50(1) underscores the right to have disputes resolved in a fair manner through application of the law. The applicants assert that the respondent raised a preliminary objection to their claim, and in the arbitrator’s directions issued on November 24, 2020, counsel for the parties agreed to dispose of that preliminary objection through written submissions and indeed filed written submissions. The arbitrator considered the submissions, upheld the preliminary objection and dismissed the claim as time barred. The applicants fault this as not only violating their right to a fair hearing but also against public policy.

34. The applicants admit that both parties agreed to dispose of the preliminary objection through written submissions. That preliminary objection was determined after parties were heard on it through written submissions following consent of their counsel. The applicants knew or ought to have known that the decision on the preliminary objection could go either way. They were heard, but lost.

35. The fact that the decision went against them could not, in my view, be a violation of the right to a fair hearing guaranteed under theConstitution. What is important in advancing the right to a fair hearing and access to justice, is that parties are given an opportunity to be heard on their case or issue they present to court for adjudication. The preliminary point was one issue they wanted the arbitrator to resolve and they were heard on it which was in tandem with the right of access to justice and the right to fair hearing espoused in articles 48 and 50(1), respectively.

36. I also do not agree with the applicants that the award was against public policy. In Christ of All Nations v Apollo Insurance Company Limited (supra), the court stated that an award will be set aside under section 35(2) (b) (ii) of the Arbitration Act as being inconsistent with the public policy of Kenya if it was shown that it was either inconsistent with theConstitution or other laws of Kenya, whether written or unwritten; or was inimical to the national interest of Kenya; or contrary to justice and morality.

37. Parties having submitted themselves before the arbitrator on the preliminary objection, the decision arising from the objection could not be deemed to be against public policy. I agree with the respondent such an argument would make the application an appeal which cannot be determined in the manner the applicant has moved the court.

38. In the end, having considered the application and arguments from parties, the conclusion I come to, is that the application has no merit. It is declined and dismissed with costs.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 11TH DAY OF NOVEMBER 2022E C MWITAJUDGE