[2022] KEHC 13479 (KLR)

Equity Bank (K) Ltd v Dimonde Omonde t/a Dimonde Agencies and Auctioneers (Miscellaneous Application E058 of 2021) [2022] KEHC 13479 (KLR) (3 October 2022) (Ruling)

Neutral citation: [2022] KEHC 13479 (KLR)

Republic of Kenya

In the High Court at Bungoma

Miscellaneous Application E058 of 2021

DK Kemei, J

October 3, 2022

Between

Equity Bank (K) Ltd

Applicant

and

Dimonde Omonde t/a Dimonde Agencies and Auctioneers

Respondent

(Being an Appeal from the taxation of the Honourable C.A.S Mutai, Senior Principal Magistrate made on 23rd June, 2022 at Bungoma in Misc. App No. 159 of 2012)

Ruling

1. Vide chamber summons dated June 23, 2022 and filed in court on June 24, 2022, the instructing party/applicant brought an application pursuant to rule 55 (5) of theAuctioneer’s Rules 1997and section 3A of the Civil Procedure Act and all other enabling provisions of the law seeking the following orders:i.Spent;ii.This honourable court be and is hereby pleased to set aside the taxation proceedings/ruling of June 17, 2022 for Kshs 42, 455/=.iii.This honourable court be pleased to find that the taxing master had no jurisdiction to tax the bill of costs dated January 11, 2022 in light of this honourable court’s ruling delivered on February 21, 2022 in Bungoma High Court Misc Application No E047 of 2021 Equity Bank (K) Ltd v Dimonde Omonde T/A Dimonde Agencies and Auctioneers.iv.Costs of the application.

2. The application is predicated upon the grounds set out therein. It is contended that despite the knowledge of the existing appeal challenging, inter alia, the jurisdiction of the taxing master to entertain taxation proceedings and eventually tax the auctioneer’s bill of costs in light of the service legal agreement and further being present or represented at the ruling thereof, the auctioneer still went ahead and filled his bill of costs. It is further contended that through submissions dated April 22, 2022 informing the taxing master of the contents of the learned Judge’s verdict and even attaching a copy of the ruling to that effect, the taxing master still went ahead and taxed the bill of costs at Kshs 42,455/=.

3. The application was supported by the affidavit sworn by Kariuki Kingo’ri sworn on June 23, 2022 and filed on June 24, 2022 in which he averred that despite the knowledge of the existing appeal challenging, inter alia, the jurisdiction of the taxing master to entertain taxation proceedings and eventually tax the auctioneer’s bill of costs in light of the service legal agreement and further being present or represented at the ruling thereof, the auctioneer still went ahead and filed his bill of costs. It is further contended that through submissions dated April 22, 2022 informing the taxing master of the contents of the learned judge’s verdict and even attaching a copy of the ruling to that effect, the taxing master still went ahead and taxed the bill of costs at Kshs 42,455/=.

4. The auctioneer/respondent herein opposed the application vide a replying affidavit sworn by Dickson Omonde on July 4, 2022 and filed on July 29, 2022. He averredinter alia; that the applicant in Bungoma High Court NoE047/2021 did not disclose to the court that they had already cleared the whole amount of Kshs 2, 095, 675/= thus making the ruling academic; that the bill of costs dated January 11, 2022 and marked KK-2 is not a bill filed by auctioneer but by his advocates on record which emanates from a dismissed application which was not a subject in Bungoma High Court Misc NoE047 of 2021.

5. In response to the respondent’s replying affidavit, the applicant filed a further affidavit sworn by Kariuki Kingori dated August 15, 2022 and filed on August 17, 2022 wherein he averred inter alia; that under the service level agreement, the auctioneer and the bank executed a consent dated February 9, 2021 whereby they settled the auctioneer’s storage charges at an all-inclusive fee which the bank was paying in piecemeal; that despite the consent and the knowledge of the bank, the auctioneer proceeded to file his bill of costs as Bungoma Misc App No 159 of 2021; that aggrieved by the taxation, the bank filed an application before the taxing master for review on grounds of existence of a consent recorded by the parties but the same was dismissed on grounds that the same was misplaced; that through a ruling by this honourable court, the taxation proceedings were set aside together with certificate of costs and that the matter was referred to arbitration; that despite the knowledge of this ruling and information to the taxing master that the proceedings had been set aside, he still proceeded to tax the bill of costs at Kshs 42, 455/=.

6. The present application was canvassed by way of written submissions. The counsels for both parties duly filed and exchanged their respective submissions. I have given due consideration to the application, rival affidavits and submissions and find the following issues necessary for determination: -i.Whether the parties had entered into an agreement containing an arbitration clause?ii.Whether a dispute has arisen between the parties?iii.Whether this court can exercise its discretion to set aside orders of the trial court and make orders for arbitration?

7. It is noted that the terms of engagement between the applicant and respondent were reduced into writing through a service level agreement executed on October 12, 2020 by Equity Bank (K) Ltd and on September 28, 2020 by Dimonde Agencies & Auctioneers respectively. The said agreement was marked as KK2. A perusal of the agreement shows that parties agreed on various terms and rules relating to, inter alia, the duties of the firm, fees, termination, variation, guarantee and indemnity, file storage, confidentiality, waiver & amendment and dispute resolution.

8. The dispute resolution clause particularized as clause 9 provided for an alternative dispute resolution mechanism as follows:1. Any concerns, complaints or disputes that the bank may have arising out of any services provided by the firm or the firm has arising out of the relationship with the bank will be raised and discussed between the approved instructors and the person in the firm who is leading or supporting the relevant engagement. A response to such concern, complaint or dispute shall be promptly responded to and in any event not later than 48 hours after it is communicated.2. In the event of any dispute, controversy or claim relating to any engagement instruction or these terms (“dispute”), the bank and the firm agree that an approved instructor and a partner of the firm shall negotiate in good faith in an attempt to resolve such dispute. If such dispute has not been resolved to the parties’ mutual satisfaction within twenty (20) days after initial notice of the dispute (or such longer period as the parties may agree), then a senior executive on behalf of each party shall negotiate in good faith in an attempt to resolve such dispute amicably for an additional ten (10) days (or such longer period as the parties may agree).3. If any dispute has not been resolved to both parties’ satisfaction, then the dispute, including any question regarding breach, existence, validity or termination or the legal relationships established by this agreement, shall be finally resolved by arbitration. It is agreed that: If after the period for settlement of disputes as set out herein above is not resolved, it shall be referred to arbitration in accordance with the provisions of the Arbitration Act,1995 for determination by the arbitration of a single arbitrator to be appointed by mutual agreement of the parties or, if the parties cannot agree upon the appointment, by the chairman for the time being of the Chartered Institute of Arbitrators of Kenya Chapter (the “Institute”).

Such arbitration shall take place in Nairobi and shall be conducted in accordance with the rules of arbitration of the institute, each party shall bear its own costs in the arbitration.

Notwithstanding the above clause, the bank shall have the right to go to court.

9. There is no disposition in the affidavit sworn by the respondent on whether any attempts were made to resolve the dispute arising under the relevant clause 9 of the service level agreement.

10. The respondent, in my humble view, had an obligation to breathe life into the dispute resolution clause in the agreement. However, according to the record and pleadings, the applicant has raised the fact that the respondent withheld this critical piece of information concerning the dispute resolution clause from the taxing master and hence no order was made by the taxing master to refer this matter to arbitration.

11. This court also notes that there is evidence that the parties agreed that all disputes and claims arising out of or in connection with the service level agreement would be subject to the dispute resolution clause 9. The question now is whether the respondent was justified in non-disclosure and ignoring the arbitration clause, and if not, whether this court should enforce the arbitration clause and refer the matter to arbitration.

12. The procedure and authority for referring matters to arbitration is provided for under section 6 of the Arbitration Act which stipulates as follows:''6 (1) A court before which proceedings are brought in a matter which is 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 proceedings is sought, stay the proceedings and refer to arbitration unless it finds:a.That the arbitration agreement is null, 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.

13. The affidavits sworn by the applicant shows that a dispute arose during the performance of the contract. In my humble opinion, the arbitration clause's provisions had garnered insufficient attention. The clause binds the parties to the agreement to opt for arbitration in the event of a dispute and explicitly provides the steps to be taken to resolve it.

14. Though the applicant filed chamber summons application against the respondent, the pleadings clearly show that the applicant seized the first opportunity to raise the issue of arbitration in his supporting affidavit.

15. I find that failure of full disclosure of the existence of the service level agreement clause 9 by the respondent was at the detriment of the applicant. This may result in the discharge of any order made upon ex-parte application.

16. The facts as deponed in the affidavits of the applicant show that the trial court's jurisdiction was limited by the existence of the arbitration clause 9. I am guided by the provisions of the Constitution and other legislation which clearly show that the court has power to refer disputes to alternative methods of dispute resolution.

17. Article 159 (2)(c) of the Constitution of Kenya provides as follows: -“In exercising judicial authority, the courts shall be guided by the following principles: -alternative forms of dispute resolution including reconciliation, mediation, arbitration and traditional dispute resolution mechanisms shall be promoted subject to clause (3).”

18. Under section 59 C of the Civil Procedure Act Cap 21 (Laws of Kenya), it is provided that: -“1. Any suit may be referred to any other method of dispute resolution where the parties agree or the court considers the case suitable for such referral.2. Any other method of alternative dispute resolution shall be governed by such procedure as the parties themselves agree to or as the court may in its discretion order....”

19. In addition, under Order 46 rule 20 (1) of the Civil Procedure Rules, 2010, it is stipulated as follows: -“Nothing under this order may be construed as precluding the court from adopting and implementing of its own motion or at the request of the parties, any other appropriate means of dispute resolution (including mediation) for the attainment of the overriding objective envisaged under sections 1A and 1B of the Act.”

20. It is evident that this court is mandated by the Constitution of Kenya, 2010 to promote the use of alternative dispute resolution mechanisms and that it is also vested with power in civil cases to refer any matters it deems suitable for resolution by such appropriate methods for the attainment of the overriding objective contemplated under sections 1A and 1B of the Civil Procedure Rules, 2010. In the instant application, the parties voluntarily agreed to subject themselves to arbitration should any dispute arise between them.Section 10 of the Arbitration Act states as follows:''Except as provided in this Act, no court shall interfere, in matters governed by this Act.''

21. In my opinion, the arbitration clause 9 in the contract precluded the trial court from exercising jurisdiction. Clearly, even though the subject matter of the application falls within the trial court's pecuniary jurisdiction, the arbitration clause in the parties' service level agreement limits the trial court’s intervention as the parties were required to go through arbitration in the event of a dispute. It also transpired from the parties rival submissions that a consent had been entered into by the parties regarding payment of the respondent’s charges which somehow was not abided by. If that happened, then the parties were required to fall back on the arbitration as agreed prior to the respondent taking up the duties under the contract. There is no evidence that the parties in the alleged consent had waived the application of arbitration in their dispute. That being the case, it is my view that arbitration was the right forum in the resolution of the dispute and thus the proceedings in the trial court ought not to have been entertained beyond a direction that the matter be referred to arbitration. It is thus clear that the respondent has stolen a match against the applicant when it failed to disclose the existence of an arbitration clause in the parties’ service agreement and which has prejudiced the applicant. The applicant’s request to hold the proceedings pending arbitration therefore has merit.

22. For the above reasons, the applicant’s application dated June 23, 2022 has merit. The same is allowed in the following terms:a.The taxation proceedings conducted before Hon C A S Mutai SPM on June 17, 2022 together with the judgement, decree and certificate of costs made in Miscellaneous Civil Application No 159 of 2021 are hereby set aside as the taxing master lacked jurisdiction to tax the bill of costs in light of the arbitration agreement.b.The costs of this application shall abide the outcome of the arbitral proceedings.It is so ordered.

DATED AND DELIVERED AT BUNGOMA THIS 3RD DAY OF OCTOBER, 2022. D. KEMEIJUDGEIn the presence of:Miss Komera for ApplicantNo appearance Wamalwa Simiyu for RespondentKizito Court Assistant