[2022] KEHC 13766 (KLR)

Ibrahim & 2 others v Monarch Insurance Company Limited & 2 others (Civil Suit 388 of 2012 & Miscellaneous Application E216 of 2021 (Consolidated)) [2022] KEHC 13766 (KLR) (12 October 2022) (Ruling)

Neutral citation: [2022] KEHC 13766 (KLR)

Republic of Kenya

In the High Court at Nakuru

Civil Suit 388 of 2012 & Miscellaneous Application E216 of 2021 (Consolidated)

TM Matheka, J

October 12, 2022

Between

Hassan M. Ibrahim

1st Plaintiff

Abdirahman Nurrow Issak

2nd Plaintiff

and

Monarch Insurance Company Limited

Defendant

As consolidated with

Miscellaneous Application E216 of 2021

Between

Monarch Insurance Company Limited

Applicant

and

Hassan M. Ibrahim

1st Respondent

Abdirahman Nurrow Isaak

2nd Respondent

Ruling

1. The matter before court is the application dated November 5, 2021 brought under Section 36 of the Arbitration Act, Rules 6 and 9 of theArbitration Rules, order 46 rule 18, order 49 rule2 and order 51 rule 1 of the Civil Procedure Rules 2010, Section 1A, 1B and 3A of the Civil Procedure Act and Article 159(2) (a)(b) and (d) of the Constitutionof Kenya seeking orders: -i.Spent.ii.That this honorable court be pleased to receive and recognize the arbitral award made on July 30, 2021. iii.That the arbitral award made on July 30, 2021 be deemed as a Judgment and subsequently Decree of this honorable court.iv.That this honorable court be pleased to grant leave to the claimant/applicant to enforce Award made on July 30, 2021. v.That the costs of this application be provided for.

2. The grounds for the application are on its face and the affidavit sworn by Hassan M ibrahim on his behalf and on behalf of his co-applicant. They each entered into a policy agreement with the Respondent; respectively Policy Motor Insurance Number 2011. 080. 010870-COMP and Motor Insurance Number 2011. 080. 010871-COMP both dated July 21, 2011 for the period between August 1, 2011 and July 31, 2012 where the Respondent agreed to provide each with a comprehensive insurance cover for Motor Vehicle Registration Number KBP 217 M and Tanker ZD 6610 in consideration of an Annual Premium of Kshs 740,156. 00/= for the sum insured being Kshs 7,310,000/=and Motor Vehicle Registration Number KBP 358 X and Tanker ZD 6948 in consideration of an annual premium of Kshs 771,700/= paid to it by the 2nd claimant against loss and damage, the sum being insured being Kshs 7,690,000/=. The Respondent also agreed to cover any products carried at any one time by each of the subject Motor Vehicles to a value of Kshs 3,000,000/=. In addition the respondent issued each with COMESA–Yellow Cards to run from October 4, 2011 to July 31, 2012 and assured them that the same would take care of risks outside Kenya. On January 20, 2012 during the currency of the respective policies, the two Motor Vehicles were damaged by fire which broke out within the customs Department Yard in Juba, Southern Sudan, while the said Motor Vehicles were parked awaiting clearance.

3. They immediately reported the incident to the Respondent in compliance with the terms of the policy but the Respondent denied liability on grounds that insurance cover was limited to loss within Kenya. Subsequently they lodged this suit against the Respondent seeking compensation in the sum of Kshs 10,310,000. 00/- and Kshs 10,690,000/- together with costs and interests.

4. By an application dated October 26, 2012 the respondent sought stay of the proceedings in the suit and the transfer of this suit to arbitration in accordance with clause 9 of the Policy document. The application was compromised by way of consent and an order dated March 11, 2013 with the parties agreeing to submit to the arbitral tribunal jurisdiction.

5. Each party appointed its own arbitrator, and the arbitrators appointed an umpire in compliance with the provision of the Arbitration Clause.On July 30, 2021 the arbitrators made an award in favour of the applicants and since the same had not been set aside within the requisite statutory period of 30 days, it was now their prayer that the same be recognized, adopted and enforced as an order and decree of this Court.

6. The application was opposed through the respondent’s Manager of Legal Services one Rosemary Kangwana Replying Affidavit sworn on April 14, 2022 on the grounds that the application is incompetent, fatally defective and ought to be struck out in limine; that it was filed in a terminated suit; that the original award and agreement or certified copies had not been filed in accordance with Section 36(3) of the Arbitration Act and Rules 4(3) and 5 of the Arbitration Rules; that the court had been rendered functus officio when the matter was stayed and referred to arbitration and any arbitral award could only be enforced and recognized in a freshly filed independent cause in a miscellaneous application as contemplated under section 36(3) of the Arbitration Act and Rules 4(3) and 5 of the Arbitration Rules.

7. The respondent took the position that though the parties had an arbitration agreement through consent order dated March 11, 2013 the arbitral award was not proper for recognition and enforcement in view of sections 36 and 37 of the Arbitration Act for reasons that: the umpire did not participate in the proceedings; the arbitral tribunal founded its decision on matters outside the Policy Documents by relying on the COMESAYellow Cards third party cover issued separately to the Plaintiffs in allowing the plaintiff’s claim for material loss and damage instead of relying on the policy document; the Arbitrators acted in contravention of Section 32 B (1) of the Arbitration Act by failing to determine and apportion the arbitration costs and referring the same to be taxed before the High Court; they also erred in awarding interest on the amount from date of the filing of the suit yet this court was not seized of the arbitration matter as per the arbitration clause.

8. The applicants’ filed a further affidavit sworn by Hassan M. Ibrahim on April 26, 2022 where he asserted that their application was in compliance with section 36(3) of the Arbitration Act and Rule 4(3) and 5 of the Arbitration Rulesas he filed an original copy of the award & the arbitration agreement marked as HM1-6 and HM1-1, HM1-2, HM1-3,HM1-4 in his Supporting Affidavit of November 5, 2021; that this court had only stayed the proceedings and the suit was yet to be determined hence the court was not functus officio; that the form of the application had not prejudiced the respondent in any way hence no ground for striking out the application; that the umpire would only be allowed to take over the proceedings only where the arbitrators failed to agree; that each had voluntarily submitted to the jurisdiction of the arbitration proceedings and the respondent had the opportunity to challenge the composition of the tribunal before the matter was heard and an award made.

9. He contended that the court in Synergy Industrial Credit Limited v Cape Holdings Limited [2020] eKLR while dealing with an issue on construction of arbitral clauses referred with approval the case ofFiona Trust v Pavlov[2008]1 Lloyds Law Report254 where Lord Hoffman stated as follows:-“In my opinion the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction…if any businessman did want to exclude disputes about the validity of a contract, it would be comparatively easy to say so.”

10. He deposed that in the case of Christ For All Nations v Apollo Insurance Company Ltd[2002]2 E.A 366 as was quoted in Kenya National Highways Authority v Pride Enterprises Limited & Another [2020]eKLR the court stated that:-“an error of fact or law or mixed fact and law or of construction or a statute or contract on the part of an arbitrator cannot by any stretch of imagination be said to be inconsistent with the Public Policy of Kenya and that on the contrary the Public Policy of Kenya leans towards finality of arbitral awards and parties to an arbitration must learn to accept an award, warts and all, subject only to the right of challenge within the narrow confines of Section 35 of the Arbitration Act.”

11. In light of the above, he contended that assuming that the arbitrator reached wrong conclusions of fact, or analysis of evidence, or interpretation of the contract, the same was still within the fallibility of the arbitrator and that errors of law, or fact, or mixed fact and law, these would not be grounds for challenging an arbitral award as anticipated by section 37 of the Arbitration Act, 1995.

12. In addition, he relied on Mahican Investments Limited & 3 others v Giovanni Gaida & 80 others [2005] eKLR where the court stated that a court will not interfere with the decision of Arbitration even if it is apparently a misinterpretation of a contract, as this is the role of the Arbitrator.

13. He averred that the arbitral tribunal correctly gave directions on costs and that parties were further at liberty to agree on costs.

14. He stated that the Court of Appeal inMemphis Limited v Kenya Ports Authority (Civil application 39 of 2021) [2022] KECA 105 (KLR) affirmed that an arbitration agreement in a contract can be varied by consent of counsel on behalf of their clients or through an arbitrator’s order for directions.

15. While this application was pending the defendant/respondent filed Misc application E216 of 2021 dated October 29, 2021 under Section 35 of the Arbitration Act, Chapter 49 of the Laws of Kenya, Order 51 Rule 1 of the Civil Procedure Rules, 2010 and all enabling provisions of law seeking orders:1. The Arbitral award by Arthur K. Igeria and Kisila Daniel Gor dated July 30, 2021 in the matter of an Arbitration between Hassan M. Ibrahim & Abdirahman Nurrow Isaak-Versus-The Monarch Insurance Company Limited be and is hereby set aside.2. The applicant is awarded costs of this application.

16. It is to be noted that the facts are exactly the same as they are in the present application. The application is supported by the affidavit of the Manager- Legal Services of the applicant Rosemary Kangwana sworn on October 29, 2021.

17. A perusal of that application reveals that the grounds for the application are the grounds the defendant/applicant relies on to oppose the application for recognition and enforcement.

18. Similarly, the grounds for opposition by the plaintiff/respondent are the same grounds the respondents have relied upon in support of the application for recognition and enforcement.

19. Parties filed rival submissions with respect to this application as well.

20. The plaintiff/applicants submitted that the only issue for determination was whether they had met the threshold for adoption and recognition of the arbitral award dated July 30, 2021.

21. Regarding the issue of noncompliance with the provisions of Section 36 (3) of the Arbitration Act, the Plaintiffs, submitted that in their Supporting Affidavit they had annexed copies of policy document, consent order and original arbitral award in compliance with the provisions of the above section.

22. That in any event the defendant/Respondent had a chance to present its case before the arbitral tribunal and the arbitrators looked at the facts and reached a finding detailing the reasons for their holding. Court was referred to Kenya Oil Company Limited & Another v Kenya Pipeline Company Ltd[2014] eKLR where the Court of Appeal made reference to the English case of Geogas S.A v Trammo Gas Ltd (The “Baleares”) where Lord Justice Steyn said:-“The arbitrators are the masters of the facts. On an appeal the court must decide any question of law arising from an award on the basis of a full and unqualified acceptance of the findings of fact of the arbitrators. It is irrelevant whether the Court considers those findings of fact to be right or wrong. It also does not matter how obvious a mistake by the arbitrators on issues of fact might be, or what the scale of the financial consequences of the mistake of fact might be. That is, of course, an unsurprising position. After all, the very reason why parties conclude an arbitration agreement is because they do not wish to litigate in the courts. Parties who submit their disputes to arbitration bind themselves by agreement to honour the arbitrators’ award on the facts. The principle of party autonomy decrees that a court ought never to question the arbitrators’ findings of fact.”

23. They also relied on Independent Electoral and Boundaries Commission v John Omollo Naykongo (t/a H.R Ganjee & Sons)[2021] eKLR where the courts shed light onto the importance of the arbitration proceedings as espoused in the Constitution of Kenya 2010 stating that:-“Arbitration is now constitutionally underpinned as a dispute resolution mechanism and the court must not only respect the process when it meets the law, but also promote. The principle of party autonomy decrees that a court ought never to question the arbitrator’s findings of fact.”

24. On the issue of arbitration costs and interest thereon, they argued that Section 34 of the Arbitration Act empowers a party to seek for correction of any computation, clerical and typographical and any other errors and to clarify and remove any ambiguity concerning specific points in the arbitral award or additional award within thirty (30) days of receipt of the arbitral award. The respondent failed to take up the opportunity and this was an afterthought intended to defeat enforcement of the arbitral award herein.

25. On whether this court is functus officio, the applicants argued that this court had not expressly given a perfect order to finalize the matter herein and made reference to Dinesh Construction Company Limited v Kenya Sugar Research Foundation[2021] eKLR where the court referred to the holding in Raila Odinga v IEBC & 3 OthersPetition No5 of 2013 on the definition of the term functus officio:-“...A court is functus when it has performed all its duties in a particular case. The doctrine does not prevent the court from correcting clerical errors nor does it prevent a judicial change of mind even when a decision has been communicated to the parties. Proceedings are only fully concluded, and the court functus, when its judgment or order has been perfected. The purpose of the doctrine is to provide finality. Once proceedings are finally concluded, the court cannot review or alter its decision; any challenge to its ruling on adjudication must be taken to a higher court if that right is available.”

26. The plaintiff/applicants argued that though the rules of procedure are important in judicial function, the same should not supersede the right to fair trial as envisioned by article 159 of the Constitution 2010especially in view of the fact that the defendant/respondent had not demonstrated any prejudice suffered and that substantive justice would be served by enforcing the award in the main file which had been stayed pending the arbitral award.

27. The defendants filed their submissions on May 27, 2022.

28. With respect to this application the defendant set out the following issues for determination:-a.Whether the suit herein terminated and the court is functus officio for purposes of recognition and enforcement of the Arbitral Award.b.Whether the application herein is competent and incurably defective for not being properly filed in accordance with the provisions of the Arbitration Act and the Arbitration Rules, 1997. c.Whether recognition and enforcement of the arbitral award ought to be refused.

29. On the first issue, the Defendant/respondent submitted that the suit terminated and the court became functus officio when the matter was referred to arbitration. That the applicant ought to have filed a miscellaneous application under section 36(3) of the Arbitration Act and Rules 4(3) and 5 of the Arbitration Rules. For this proposition the Defendant relied on Iris Properties Ltd & Another v Nairobi City Council[2002] eKLR.

30. On the second issue, the defendant submitted that the applicant failed to comply with the mandatory provisions of section 36(3) of the Arbitration Act and Rules 4(3) and 5 of the Arbitration Rules. They also relied on David Chabeda & Another v Francis Ingasi[2007] eKLR where the court held that such failure rendered the application for recognition of an arbitral award incurably defective. This was upheld in the case of National Oil Corporation of Kenya Ltd v Prisco Petroleum Network Ltd.

31. The defendant submitted that the provision of Article 159 of the Constitution should not be used to trample on rules of procedure as submitted by the plaintiff. In support of this position the Defendant cited Kiage, JA in Nicholas Kiptoo Arap Korir Salat v IEBC & 6 others [2013] eKLR where the learned judge stated that:-“… that Article 159 of the Constitution and the oxygen principles which both command courts to seek to do substantial justice in an efficient, proportionate and cost-effective manner and to eschew defeatist technicalities were ever meant to aid in the overthrow or destruction of rules of procedure and to create an anarchical free-for-all in the administration of justice. This Court, indeed all courts, must never provide succor and cover to parties who exhibit scant respect for rules and timelines. Those rules and timelines serve to make the process of judicial adjudication and determination fair, just, certain and even-handed. Courts cannot aid in the bending or circumventing of rules and a shifting of goal posts for, while it may seem to aid one side, it unfairly harms the innocent party who strives to abide by the rules. I apprehend that it is in the even-handed and dispassionate application of rules that courts give assurance that there is a clear method in the manner in which things are done so that outcomes can be anticipated with a measure of confidence, certainty and clarity where issues of rules and their application are concerned…”

32. The applicant submitted that the application was incompetent not properly before court.

33. On the third issue, they relied on Airtel Networks Kenya Limited v Nyutu Agrovet Limited [2011] eKLR where the court cited the decision in Associated Engineering Company v Government of Andhra Pradesh & Another[1991] R.D.S.C 153 (1992 AIR 232 July 15, 1991) to bolster the assertion that the arbitrators acted beyond the scope of reference, where the court stated that:-“In the instant case, the umpire decided matters strikingly outside his jurisdiction. He outwent the confines of the contract. He wandered far outside the designated area. He digressed far away from the allotted task. His error arose not by misreading or misconstruing or misunderstanding the contract, but by acting in excess of what was agreed. It was an error going to the root of his jurisdiction because he asked himself the wrong question, disregarded the contract and awarded in excess of his authority. In many respects, the award flew in the face of provision of the contract to the contrary”

34. Regarding the award of interest with reference to Nakuru High Court Civil Case No388 of 2012, the defendant submitted that it was against public policy to do so when the purpose and interpretation of arbitral clauses and arbitration proceedings was to provide a separate forum for dispute resolution. The defendant on the issue of arbitration costs, the respondent submitted that the determination of arbitral costs is exclusively within the jurisdiction of an Arbitrator and relied on: Kenfit Limited v Consolata Fathers[2015] eKLR, Transworld Safaris (K) Ltd v Eagle Aviation Limited & 3 others [2012] eKLR Golden Homes (Management) Limited v Mohammed Fakruddinn Abdullai & another; Golden Homes Limited (Interested Party) [2019] eKLR. It was held that: - the court has no jurisdiction to determine the issue of costs in that, the right of a party to have recourse to the High Court against an arbitral award is limited as per the provisions of Part VI of the Arbitration Act No 4 1996. In that regard, I associate myself with the findings of the court in the cases of; Transworld Safaris Limited –v- Eagle Aviation Limited & 3 Others [2012] eKLR, and Ann Mumbi Hinga v Victoria Njoki Gathara Nairobi Civil Appeal No 8 of 2009, where the Court of Appeal held;“Part VI of the arbitration Act has a heading under the title ‘Recourse to High Court against Arbitral Awards’ and the implication is that the High Court has no other power against an arbitral award outside the provisions of Section 35 and 37 of the Arbitration Act ………….the superior court did not have jurisdiction to intervene in any manner not specifically provided for in the Arbitration Act.”

35. With respect to the application to set aside the Defendant/ applicant filed its submissions on January 27, 2022 on the following issues;i.Whether the application herein is competent, properly filed in accordance with the provisions of the Arbitration Act and the Arbitration Rules.ii.Whether the Arbitral award should be set aside.

36. The applicant submitted that setting aside the Arbitral Award is provided for under section 35 of the Arbitration Act and Rule 7 of the Arbitration Rules. That there was no requirement in the law for a party seeking to set aside an award to file the award in court first. That this requirement was only placed upon the party seeking the recognition and enforcement of the award. For this proposition the Court was referred toVictoria Furnitures Limited v Zadock Furniture Systems Limited[2017] eKLR and Elige Communications Limited v Safaricom PLC[2021] eKLR, section 4 of the Arbitration Rules 1997and Summit Cove Lines Co Ltd v UAP Insurance Co Ltd [2020] eKLR where the court questioned the mischief that was intended to be addressed by that requirement.

37. The applicant submitted that in view of the above precedent the requirements of section 36(3) of the Arbitration Act and Rules 4 and 5 of the Arbitration Rules, 1997 have been fully met since both parties were served with the final award after conclusion of arbitration proceedings and the same had not been contested or challenged by the Respondents.

38. An issue on the filing fees with respect to the award was raised. The applicant argued that Rule 10(1) of the Arbitration Act provides Kshs 10,000/= for filing an award which is not applicable to setting aside application. That falls under the provisions of Rule 10(2); fees applicable to the High Court. It therefore submitted that the instant application is competent and properly filed and in accordance with the provisions of the Arbitration Act and the Arbitration Rules, 1997.

39. With respect to the umpire’s participation in the proceedings the applicant submitted that pursuant to clause 9 of the Arbitration clause, the Umpire was to sit with the arbitrators, preside at their meetings and the making of the award but contrary to the said express provisions the umpire appointed did not do so.

40. On the issue of the arbitrators going outside their reference, the applicant cited what the US Court of Appeal for the Ninth Circuit observed in the Ministry of Defence of the Islamic Republic of Iran v Gould, Inc., cited with approval in Elge Communications Limited v Safaricom PLC [2021]eKLR that the real issue in such an inquiry is whether the award has exceeded the scope of the arbitration agreement, not whether it has exceeded the parties’ pleadings; Kenya Tea Development Agency Ltd & 7 Others v Savings Tea Brokers LimitedMl HC Misc. application No129 of 2014 [2015] eKLR where the court opined that the jurisdiction of an arbitrator is tethered to the arbitration agreement, reference and the law.

41. The applicant reiterated that pursuant to section 35(2) (a) (iv) as the arbitrator went beyond the scope of the reference by holding it liable for the Respondent’s claim which happened in Juba South Sudan which was outside the Kenya geographical area. The applicant argued that the COMESAyellow cards issued to the Respondents were to cover third party risks within the COMESARegion as guided by the Protocol on establishment of a Third Party Motor Vehicle Insurance Scheme(COMESA)

42. As to the argument by the plaintiff/respondents that some terms in the policy documents were not binding upon the parties because they were not captured in the proposal form, the applicant submitted that respondents were approbating and reprobating at the same time as they sought to rely on policy document including the jurisdiction issue for the arbitral proceedings derived from the arbitration clause in the said policies and at the same time sought to escape explicit clauses on geographical limits. On the contention that the defendant/applicant failed to disclose the issue of the geographical limits hence breaching the principle of good faith, it submitted that the plaintiff/respondents were aware of the same yet and failed to disclose to it that they were transporting goods outside Kenya.

43. The applicant also submitted that the arbitral award was in conflict with Public Policy as the arbitrators directed the High Court to tax the Arbitration costs. According to the applicant the determination of arbitral costs is exclusively within the jurisdiction of an Arbitrator. They cited the following cases; Kenfit Limited v Consolata Fathers [2015] eKLR; Transworld Safaris (K) Ltd v Eagle Aviation Limited & 3 others [2012] eKLR; Golden Homes (Management) Limited vMohammed Fakruddinn Abdullai & another; Golden Homes Limited (Interested Party) [2019] eKLR.

1st & 2nd plaintiff/respondents’ submissions. 45. The Respondents filed their Submissions on January 25, 2022.

46. The respondents submissions were anchored on holding by Ransley J. in Mahican Investments Limited and 3 Others v Giovanni Gaida & Others [2005] eKLR. They cited the provisions of section 14 and 35 of the Arbitration Act, Rules 4(2) &10(1), Order 46 Rule 9 of the Civil Procedure Rules 2010 and Clause 9 of the Policy Documents. They relied on Primka Debucon Construction Ltd. v Manyota Limited and Another [2017] eKLR where the court stated that:-“..It is upon the parties to move to court upon compliance with Section 36 of the Act, and upon filing of the Arbitral award in court that the court would constitute itself and cloth itself with the necessary jurisdiction to deal with the application as stated and filed by the defendant…I am of the contrary view from the defendant's opinion that an arbitration award ought not be recognized and adopted by the court first before an application for setting it aside may be lodged. This is so because unless the arbitration award is filed in the strict sense, there is no award worth looking at.This is so because unless the arbitration award is filed in compliance with the court order, a court would be dealing with an invalid document which is null and void as is the case here. The analogy is like having a case fully heard by a court and before the judgment of the court is delivered in court, one of the parties moves the court for orders of setting aside the judgment that has not yet been delivered. It is not the scenario envisaged in Section 14 (1) (3) of the Act where a party may challenge the arbitration proceedings or the tribunal in the manner of its conduct of the proceedings before it is finalized and an award delivered. What we have here is an award that has no legal validity and therefore null and void...”

47. The plaintiffs/Respondents also relied on the case of David Chabeda & Another v Francis Ingasi [2007] eKLR and National Oil Corporation Of Kenya Ltd v Prisco Petroleum Network Ltd [2014] eKLR.

48. They emphasized the fact that the defendant applicant ought to have filed the award in court by paying the requisite fees as provided for under Section 36 of the Arbitration Act, 1995 shall be made in chambers upon payment of filing fee of Kshs 10, 000/= in accordance with Rule 10(1) of the Arbitration Rules, 1997. That the applicant’s act of merely annexing the award to its Supporting Affidavit and paying of Kshs 1500/= for filing of the same did not constitute proper filing. To bolster this position they cited Laly Sukhdev Singh v Onesmus Mwangi Muraguri[2020] eKLR where the court in respect of failure to pay court fees stated: -“It is clear from that section that the court cannot consider the notice of motion because the correct fee has not been paid. The Court of Appeal in the case South Nyanza Sugar Company Limited v Samwel Osewe Ochillo P/A Ochillo & Co Advocates Civil Appeal No 127 of 2003 stated that a plaint was invalid if the fee was not paid for it. The court stated as follows: -“The Deputy Registrar, however, had no power to exempt the respondent from paying the requisite fee with the result that the plaint was not properly filed and that being so, there was no valid plaint upon which the learned Judge of the superior court could proceed to deliver his judgment. The judgment was based on no valid plaint.Dealing with a similar situation in the Ugandan case of Unta Exports Ltd v Customs [1971] EA 648, Goudie, J. stated as follows at page 649 letters E to F:-I have no doubt whatsoever that both as a matter of practice and also as a matter of law documents cannot validly be filed in the civil registry until fees have either been paid or provided for by a general deposit from the filing advocate form which authority has been given to deduct court fees…”

49. Regarding the non-participation of an umpire in the arbitration proceedings, the Respondents submitted that the two arbitrators were in agreement therefore there was no role for the umpire to play.

50. With respect to the applicant’s averment that arbitral award must be set aside as it did not fall within the terms of reference to arbitration and or contains decisions beyond the scope of the reference to arbitration, the Respondents relied on the case ofIndependent Boundaries Commission v John Omollo Nyakongo (T/A H.RGanjee & Sons) 2021 eKLR where the court shed light onto the importance of the arbitration proceedings as espoused in the Constitution of Kenya 2010as follows:-“36. Under section 35 and 36 of the Act, the jurisdiction of this court is never Appellate to entitle the court to review the proceedings and come to its own conclusion. It is not open to this court to differ and seek to reverse the arbitral award merely because in its opinion a different conclusion should have been reached. Arbitration is now constitutionally underpinned as a dispute resolution mechanism and the court must not only respect the process when it meets the law, but also promote. The principle of party autonomy decrees that a court ought never to question the arbitrator’s findings of fact.”

51. On the issue of arbitral award on interest, the respondents reiterated their averments contained in their Replying Affidavit and urged that the application be dismissed with costs.

Analysis and determination 52. Having considered the two applications the parties’ Affidavits and respective submissions. The main issues for determination are as follows:1. Whether this court became functus officio by virtue of the Orders issued on March 11, 2013 and thereby lacks jurisdiction to entertain the application2. Whether the plaintiffs/applicants complied with the mandatory provisions of 36 of the Arbitration Act and rule 4 of the rules thereof and whether there is a requirement for the defendant/ applicant to comply with the same in an application for setting aside of the award.3. Whether the application for setting aside is merited4. Whether the application for recognition and enforcement is merited.5. Who should bear the costs of each of the applicationsThe defendant Whether this court became functus officio by virtue of the Orders issued on March 11, 2013 and thereby lacks jurisdiction to entertain the application

53. Contends that this court became functus officio when it stayed the suit and referred the dispute to arbitration under Section 6 of the Arbitration Act. The plaintiffs on their part argue that this suit has not been fully determined as it was stayed pending the outcome in the arbitration.

54. The doctrine of ‘Functus Officio’ was stated by the inRailaOdinga v IEBC & 3 OthersPetition No 5 of 2013 the Supreme Court of Kenya cited with approval the following passage from “The origins of the functus officiodoctrine with specific reference to its application in Administrative Law” by Daniel Malan Pretorious:-“The functus officio doctrine is one of the mechanisms by means of which the law gives expression to the principle of finality. According to this doctrine, a person who is vested with adjudicative or decision making powers may, as a general rule, exercise those powers only once in relation to the same matter...The [principle] is that once such a decision has been given, it is (subject to any right of appeal to superior body or functionary) final and conclusive. Such a decision cannot be reviewed or varied by the decision maker.”

55. Similarly the Court of Appeal in Telcom Kenya Ltd v John Ochanda [2014] eKLR stated as follows:-“Functus Officio is an enduring principle of law that prevents the re-opening of a matter before a Court that rendered the final decision thereon-The general rule that the final decision of a Court cannot be re-opened derives from the decision of the English Court of Appeal in re-St Nazarire Co, (1879), 12 Ch. D88. The basis for it was that the power to rehear was transferred by the Judicature Acts of the appellate division.``

56. The basis for the argument that the court is functus is the order of consent issued by this court in the application brought on March 11, 2013 by the defendant, seeking stay of proceedings and referral of the matter to an arbitrator. The stay of proceedings is allowed by Section 6 of the Arbitration Act which states;“Stay of legal proceedings(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; or(b)that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.Under Section6 (2) it clearly provides: Proceedings before the court shall not be continued after an application under subsection (1) has been made and the matter remains undetermined. (emphasis mine)

57. Evidently the law clearly states that the matter remains undetermined. Hence it is not correct that the court became functus by the mere fact of referral to arbitration. The matter remained undetermined. Hence it is not correct that the court became functus after the matter was referred to arbitration. The answer to that issue is in the negative. I find persuasion Bellevue Development Company Limited v Vinayak Builders Limited & Another [2014] eKLR, where the court warned against overstretching the principle and advised that the order or relief sought would determine whether the court was functus officio or not. It held: -“... care should be taken not to inadvertently or otherwise overstretch the application of the concept of functus officio; for, in all senses of the law, it does not foreclose proceedings which are incidental to or natural consequence of the final decision of the court such as the execution proceedings including contempt of court proceedings, or any other matter on which the court could exercise supplemental jurisdiction. Therefore, in determining whether the court is functus officio one should look at the order or relief which is being sought in the case despite that judgment has already been rendered by the court.”

Whether the plaintiffs/applicants complied with the mandatory provisions of section 36 of the Arbitration Act and rule 4 and 5 of the Arbitration Rules 1997 thereof 58. Section 36 of the Arbitration Act provides:“(1)A domestic arbitral award, shall be recognized as binding and, upon application in writing to the High Court, shall be enforced subject to this section and section 37(2)…(3)Unless the High Court otherwise orders, the party relying on an arbitral award or applying for its enforcement must furnish(a)the original arbitral award or a duly certified copy of it; and(b)the original arbitration agreement or a duly certified copy of it.

59. I have perused the record. I have perused the affidavits relied on by the applicant. While there is a document headed “Final Award” and bearing the signatures of arbitrators; Arthur K. Igeria (FCIArb) and Kisilah Daniel Gor Advocate, the same are neither the original arbitral award, nor are they certified copies of the arbitral award. To that extent the plaintiff/applicants have not complied with Section 36 of the Act. However, it is noteworthy that both parties to the arbitration award are each aware of the award. One is seeking to enforce it, the other is seeking to set it aside.

60. The application to set aside is not based on any of the groundsof incapacity, or integrity, of lack of notice or participation as set out under Section 35 viz:(i)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 the making of the award was induced or affected by fraud, bribery, undue influence or corruption.The application is challenging both the procedural and substantive legality of the award. This would not be cured by the filing of the original award.

61. Clearly therefore whether or not the original copy or the certified copy was filed these parties have each interacted with the document. It was served on each one of them and neither is challenging its authenticity. They accept it as the award and have brought their respective applications and responses on that basis. Just like their referral of the matter to arbitration, the exercise of their autonomy in bringing this matter to an end ought not be limited due to a procedural failure that has not prejudiced either of them.

62. In this I find I am of the same view as Justice PJ Otieno, in his observations in Summit Cove Lines Co Ltd v UAP Insurance Co Ltd [2020] eKLR where in a similar situation where each of the parties annexed the same award to their application, the consent order and the arbitration agreement, he said:“10. The challenge on the competence of the application is grounded on the failure to exhibit on the application, the original award and the arbitration agreement. It is not in doubt that the statute mandates that the two be exhibited. What has not been canvassed by the respondent is the rational for the law and the mischief it was aimed against. By nature, arbitration is consensual and the court ought to be satisfied that indeed the two contestants were at an ad idem that their dispute be resolved by arbitration. That is the rationale for demanding that the agreement be exhibited to court. On the other hand the need to exhibit the original or certified copy of the award is purely for authentication that there is a genuine award made in terms of the agreement by the parties. In my view, the need for those documents in the original or certified form is made unnecessary if the two parties agree that they agreed to go to arbitration, arbitration proceeding took place and a final award was made in terms of a copy, even if not certified , exhibited to court and agreed by both to be the award.”

63. Rule 4 and 5 of the Arbitration Rules provide respectively;“4 (1)Any party may file an award in the High Court.(2)All applications subsequent to filing of an award shall be by summons in the cause in which the award has been filed and shall be served on all parties at least seven days before the hearing date.(3)If an application in respect of the arbitration has been made under rule 3(1) the award shall be filed in the same cause; otherwise the award shall be given its own serial number in the civil register.5The party filing the award shall give notice to all parties of the filing of the award giving the date thereof and the cause number and the registry in which it has been filed and shall file an affidavit of service.”

64. Evidently Rule 4 does not specify the form the filing of the award is to take except that it is to be filed in the High Court. Sub rule one is the one that is specific: that after the filing of the award, subsequent applications will be by summons in that cause.

65. It is my finding and holding that in the circumstances of this case, that failure by itself is insufficient to bring down the application for recognition and enforcement,

Whether the order sought for the recognition and enforcement of the arbitral ward is merited 66. Section 37 of the Arbitration Act provides for the circumstances under which the court can refuse an application such as the one brought by the applicant.Grounds for refusal of recognition or enforcement(1)The recognition or enforcement of an arbitral award, irrespective of the state in which it was made, may be refused only—(a)at the request of the party against whom it is invoked, if that party furnishes to the High Court proof that—(i)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, under the law of the state where the arbitral award was made;(iii)the party against whom the arbitral award is invoked 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 it 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, that part of the arbitral award which contains decisions on matters referred to arbitration may be recognised and enforced; or(v)the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing any agreement by the parties, was not in accordance with the law of the state where the arbitration took place; or(vi)the arbitral award has not yet become binding on the parties or has been set aside or suspended by a court of the state in which, or under the law of which, that arbitral award was made; or(vii)the making of the arbitral award was induced or affected by fraud, bribery, corruption or undue influence.

67. This provision shifts the responsibility of furnishing the court with evidence to demonstrate to the court the grounds upon which the recognition and enforcement of the award must be refused to the party against whom the award was made.

68. In this case the respondent has no issue with the appointment of the arbitrators but raises issue with the composition of the arbitral tribunal and the procedure adopted by the tribunal. In urging this position the respondent cited the arbitration clause in the contract of agreement: Clause 9 of the policy document which provides:-“All differences arising out of this policy shall be referred to the decision of an arbitrator to be appointed in writing by the parties in difference or if they cannot agree upon a single arbitrator to the decision of two Arbitrators one to be appointed in writing by each of the parties within one calendar month after having been required in writing so to do by either of the parties or in case the Arbitrators do not agree to an umpire appointed in writing so to do by the arbitrators before entering upon an the reference. The Umpire shall sit with the Arbitrators, preside at their meetings and the making of an award shall be a condition precedent to any right of action against the company….”

69. The respondent takes the position that the arbitrators were supposed to sit with the umpire during the arbitration proceedings and that the umpire was to preside over their meetings. The respondent argues that nowhere in the document filed in court as the arbitral award did the umpire at any time sit with the arbitrators. However, a reading of that clause clearly demonstrates that the umpire's role would fall into place the moment the arbitrators were unable to agree. In this case there is no evidence that the two arbitrators were unable to agree. In fact the document filed as the award indicates a unanimous agreement. Hence the umpire’s role was not called into action. This argument fails.

70. In addition to the above argument the respondent urged the court to find that the arbitrators acted beyond the scope of reference by relying on matters extraneous to the policy document: the COMESAyellow cards that it issued to the applicants. The argument was that these were to cover third party risks in countries within the COMESAregion. That having founded the arbitral decision on this cover went contrary to the Policy document that granted them jurisdiction to arbitrate over the matter.

71. While it is a fact that the arbitrators did cite these yellow cards in their decision, the other fact is that the effect of these cards was pleaded by the applicants and demonstrated in their affidavits. When parties appeared before the arbitrators, it was upon them to demonstrate why these cards were irrelevant. The Arbitrators found that from the totality of the evidence placed before them the respondents were aware of the risk they were covering and it was for risks outside Kenya, and that they were aware of the effect of issuing those cards. How then can they turn now and expect this court to overturn that finding of fact?

72. It is now settled that a court will not interfere with an arbitral decision in any manner that they amount to it taking an appellate position. See Kenya Oil Company Limited & Another v Kenya Pipeline Company[2014] eKLR (above). To that end I would adopt the words of the court in Mahican Investments Limited & 3 others v Giovanni Gaida & 80 others [2005] eKLR that:-“A court will not interfere with the decision of Arbitration even if it is apparently a misinterpretation of a contract, as this is the role of the Arbitrator. To interfere would place the court in the position of a Court of Appeal, which the whole intent of the Act is to avoid. The purpose of the Act is to bring finality to the disputes between the parties”(44)Consequently, in respect of the first issue herein, I am not satisfied that the applicant has shown, to the requisite standard, that the Arbitrator travelled out of the confines of the reference or that he dealt with any issue that was not contemplated by or falling within the terms of the reference; or even that the Arbitrator granted a relief that was not envisaged by the agreement and therefore not specifically pleaded before him”

73. The respondent also had issue with the arbitrators’ directions with respect to the costs of the arbitration arguing that they went beyond the arbitrator’s reference and therefore fell within Section 37(a) (iv); the arbitrators directed the parties to agree on the costs and in default the same to be taxed at the High Court of Kenya. They also directed that the same be paid at court rates with effect from the date the suit was filed at the High Court. Section 32B provides; Costs and expenses“(1)Unless otherwise agreed by the parties, the costs and expenses of an arbitration, being the legal and other expenses of the parties, the fees and expenses of the arbitral tribunal and any other expenses related to the arbitration, shall be as determined and apportioned by the arbitral tribunal in its award under this section, or any additional award under section 34(5).(2)Unless otherwise agreed by the parties, in the absence of an award or additional award determining and apportioning the costs and expenses of the arbitration, each party shall be responsible for the legal and other expenses of that party and for an equal share of the fees and expenses of the arbitral tribunal and any other expenses relating to the arbitration.”

74. It is the respondent’s argument that the Arbitrators went out of their reference when they made directions as to costs with respect to the HCC 388 of 2012. Looking at Section 32B of the Arbitration Act it appears to me that the arbitrators were looking at the costs and expenses of an arbitration, being the legal and other expenses of the parties, which would be different from the fees and expenses of the arbitral tribunal. These would include other legal fees. I would be hesitant to say that they went outside their reference because the whole suit as filed was referred to arbitration.

75. The respondent also took the position that the award was against public policy. The Court of Appeal in Kenya Shell Limited v Kobil Petroleum Limited(Supra), Ringera, J., elucidated the meaning of public policy under section 35 of the Act as follows:-“An award could be set aside under section 35(2) (b) (ii) of the Arbitration Act as being inconsistent with the public policy of Kenya if it is shown that it was either(a)inconsistent with the Constitution or to other laws of Kenya, whether written or unwritten or(b)Inimical to the national interest of Kenya or(c)contrary to justice or morality.

76. There is no demonstrable ground that falls under Section 32B that has been exhibited by the defendant for consideration by this court.

79. Having found the foregoing I do find that the application for recognition and enforcement is merited.

Whether there is a requirement for the defendant/applicant to comply with the provisions of section 36 of the Arbitration Act and rule 4 and 5 of the Arbitration Rules 1997 in an application for setting aside and Whether the Orders sought by the defendant/applicant for setting aside s are merited 80. Sections 35 and 36 of the arbitration Act bear almost the exact grounds for either setting aside or for recognition and enforcement. Hence the success of one application means more or less that the other one becomes unsuccessful.

81. The parties herein agreed that the court could write one ruling for both applications.

82. On this issue, I can say here that the analysis of the grounds for allowing the application for recognition an enforcement demonstrates that there are insufficient grounds for setting aside. The only additional things I can say here are with respect to the fees for filing the arbitral award and the contention that the applicant ought to have filed the award in court before filing the application to set aside the award.

83. The plaintiff applicants annexed the arbitral award to their application and did not pay the Kshs 10,000/= required by the Arbitration Act. They too accused the defendant respondent of not paying the same fees and not a filing the award.

84. While it is evident from Section 35 that there is no requirement for an applicant seeking to set aside an arbitral award to file the award first, there is an anomaly. Until the award is filed in the court, it does not exist before the court. So, how does a party ask the court to set aside something that does not exist before it? Rule 4 statesinter alia:(1)Any party may file an award in the High Court.(2)All applications subsequent to filing of an award shall be by summons in the cause in which the award has been filed and shall be served on all parties at least seven days before the hearing date.

86. The filing of an award is discretionary. The rule says ‘may’ but the subsequent rule goes on to state that the other applications subsequent to the filing of the award shall be by summons in the cause in which the award has been filed.

87. Can a party file applications with respect to a ward without filing the award? As I stated earlier, that is the anomaly. That Section 35 does not require a party to file the award, yet setting aside has the same effect as recognition and enforcement only in the opposite. It has the equal and opposite power, if allowed as it removes the effect of the award on the parties. Without the award in the application to set aside the court is being asked to set aside something it is yet to be seized of. This is unlike the application to recognize and enforce. The document is there for the court to recognize as the award by the arbitrators and give it its judicial authority as provided for by the law.

88. Where neither party is challenging the authenticity of the award, neither of them should suffer for the omission to file the award. The party seeking the court to act on the award ought to be required to file the award. The law should not be seen to discriminate against the parties without any reasonable ground. The arbitration is entered into by consent, the parties ought to have the same opportunity to exercise equal power either way.

89. Having said that it is my view that I have demonstrated that the application to set aside fails on the grounds on which the application for recognition and enforcement stands.

90. The order that arises from all the foregoing is that the arbitration award dated 30th July 2021 be and is hereby recognised for enforcement under Section 36 of the Arbitration Act subject to the payment of the Kshs 10,000/= fees required by the Act within seven (7) days hereof.

Who should bear the costs of each of the applications 91. Costs follow the event. The Plaintiffs will have the costs of these two applications.

92. Orders accordingly.

DATED, SIGNED AND DELIVERED VIA EMAIL THIS 12TH DAY OF OCTOBER, 2022. MUMBUA T MATHEKAJUDGEM/S Gordon Ogola,Kipkoech & Co Advocates,Muri Mwaniki Thiga & Kageni LLP Advocates,