[2017] KEHC 9995 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL AND TAX DIVISION

CIVIL CASE NO. 524 OF 2009

JACQUELINE W. NJERU t/a

JAVISAPA ENTERPRISES LIMITED...............................PLAINTIFF

VERSUS

CANUCK HOLDINGS LIMITED......................................DEFENDANT

RULING

[1]This Ruling is in respect of the two applications filed herein by the parties. The first application in time is the Plaintiff's Notice of Motion dated 15 September, 2016. It was filed on 23 September 2016 pursuant to Order 46 Rule 18 of the Civil Procedure Rules, 2010 for Judgment to be entered in accordance with the Arbitral Award delivered by Arbitrator Calvin Nyachotion 6 September, 2016. The second application is the Defendant's Notice of Motion dated 31 October 2016 which was filed herein on 1 November 2016. That application seeks the setting aside of the aforesaid Arbitral Award, and it was filed under Section 35 of the Arbitration Act, No. 4 of 1995. Accordingly, directions were given by the Court on 2 November 2016 that the two applications be disposed of simultaneously.

[2] Given the nature of the two applications, I propose to consider the Defendant's application first, for obvious reasons; namely, that if the Arbitral Award is set aside as sought thereby, the first application will no doubt fall by the wayside. That application was expressed to have been filed under Sections 1A, 1B and 3Aof the Civil Procedure Act, Order 51Rule 1of theCivil Procedure Rules, 2010, Section 35(1), (2), (3) and (4)of theArbitration Act, No. 4of theLaws of Kenya. The orders sought by the Defendant thereby are:

[a] Spent

[b] That the Court be pleased to set aside the Arbitral Award herein dated 6 September 2016;

[c] That there be stay of execution and adoption of the arbitral award and any consequential orders of the Arbitrator Calvin Nyachotidelivered on 6 September 2016 pending the hearing and determination of this application;

[d] That the costs of the application be borne by the Respondent

[3] The application was based on the grounds that the Arbitral Award was delivered on 6 September 2016, over one and a half years after the Arbitrator finalized the hearing; and hence was unprocedurally and unreasonably delayed. It was further the contention of the Defendant that, in determining the dispute, the Arbitral Tribunal demonstrated bias in that it failed to consider the pleadings, evidence or submissions tendered by it, and thereby arrived at a decision which is harsh, unconscionable and oppressive to the Defendant. The Defendant further averred that the Arbitrator awarded the Plaintiff special damages and yet none was specifically proved as is required by the law. The award of costs was also impugned by the Defendant whose contention was that the breach of contract that is at the centre of the dispute was occasioned by the Plaintiff. Accordingly, the Defendant urged the Court to set aside the Arbitral Award for the dispute to be determined afresh.

[4] The application was supported by the affidavit annexed thereto, sworn by Advocate Lawrence Oigoro, who has the conduct of this matter on behalf of the Defendant. By way of background information, Counsel deposed that the parties hereto entered into a contract in 2007for the construction of apartments for sale in Lavington within the Nairobi City County known as Muthangari Gardens. The project was to be undertaken as a joint venture by the parties. However, a dispute soon arose between the parties as to the terms of their Contract. The Plaintiff accordingly opted to file this suit, and thereafter, at the instance of one of the parties, the Court gave directions on 7 November 2012 for the dispute to be referred to arbitration.It is significant that the referral was made about three years after the filing of the suit.

[5] Counsel further averred that the parties thereafter executed an Arbitration Agreement dated 30 August 2013 affirming the reference, whereupon the Chartered Institute of Arbitrators appointed Mr. Calvin Nyachoti as the Arbitrator. According to Counsel, the Plaintiff did not adduce any documentary evidence in support of the special damages claimed; and therefore he was of the view that the Arbitrator erred in law and has subjected the Defendant to unnecessary prejudice by giving an Awardtwo years after the close of hearing, which, in any event, is not supported by any documentary evidence and is devoid of reasons for the decision. Counsel averred that the amount awarded to the Plaintiff being unsubstantiated, ought to be set aside to pave way for a fresh determination.

[6] Although the parties were directed, on the 2 November 2016, to file their respective responses, it appears that the Plaintiff did not file any Replying Affidavit to controvert the allegations of fact deposed to by Mr. Oigoroin respect of the Defendant's application dated31 October 2016. It is noted however that Learned Counsel did file their respective written submissions herein as directed, and that the Plaintiff's written submissions are in respect of both applications; while the Defendant opted to file submissions only in support of its application.

[7] In his written submissions filed on 13 February 2017, Counsel for the Defendant took issue with the manner in which the arbitral proceedings were conducted and the merits of the Award. He reiterated the Defendant's posturing that the Arbitrator wholly ignored the evidence adduced by the Defendant and did not consider the submissions made on its behalf in coming up with the Award. It was further the contention of the Defendant that the Arbitral Award was induced or affected by undue influence as the decisions therein cannot be sustained by the evidence on record. Counsel thus, argued that, having failed to consider the substance of the dispute in accordance with the principles of justice and fairness, the Court should find that the Arbitrator made subjective decisions that are tainted by bias and assumptions against the Defendant. Article 50 of the Constitution and the case of Simon Taveta vs. Mercy Mutitu Njeru [2014] eKLR were cited in support of the foregoing arguments.

[8] Counsel further submitted that where special damages are claimed, as was the case herein, then the Arbitrator ought to have insisted on specific proof thereof, which was not done. It was the contention of the Defendant that the Plaintiff was not entitled to any part of the profits under the Joint Venture Agreement for the reason that she did not contribute to the construction capital; which was why the contract was terminated in the first place. Thus, Counsel for the Defendant urged the Court to find that the Award dated 6 September 2016is unmerited and have the same set aside with costs to pave way for a re-trial by an impartial tribunal. Counsel maintained that the application is properly and competently before the Court pursuant to Section 35 of the Arbitration Act, and that it was filed within the stipulated time laid down in the relevant law.

[9] On behalf of the Plaintiff, it was submitted that the Defendant has not satisfied the grounds set out in Section 35 of the Arbitration Act for the setting aside of an award; and therefore the Court has no jurisdiction, by dint of Section 10of theArbitration Act, to otherwise entertain the application. The Plaintiff thus urged the Court to dismiss the Defendant's application dated 31 October 2016 with costs.

[10] It is now trite that arbitration is a special self-contained regime of law, designed for a specific objective, namely to give the parties a free hand in seeking resolution of their dispute with an element of finality. This concept of party autonomy found expressionin Nyutu Agrovet Limited vs. Airtel Networks Limited [2015] eKLR thus:

"Arbitration as a dispute resolution mechanism is not imposed on parties. They choose it freely when they incorporate the arbitration agreement into their contract, and at times even include the finality clause as was the case here. When they do so, they send the message that they do not wish to be subjected to the long, tedious, expensive and sometimes inconvenient journey that commercial litigation entails. That is what party autonomy, a concept that the courts treats with deference, is all about."

[11] To that end, Section 10 of the Arbitration Act is explicit that:

"Except as provided in this Act, no court shall intervene in matters governed by this Act."

However, the application having been filed pursuant to Section 35 of the Arbitration Act, there can be no doubt that it is competently before the Court for that Section provides that:

(1) Recourse to the High Court against an arbitral award may be made only by an application for setting aside the award under subsections (2) and (3).

(2) An arbitral award may be set aside by the High Court only if:

a. The party making the application furnishes proof –

i. That a party to the arbitration agreement was under some incapacity or

ii. The arbitration agreement is not valid under thelaw to which the parties have subjected it or, failing any indication of that law, the laws of Kenya; or

iii. The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

iv. The arbitral award deals with a dispute not contemplated by or not falling within the terms of the reference to arbitration or contains decisions on matters beyond the scope of the reference to arbitration, provided that if thedecisions on matters referred to arbitration can be separated from those not so referred, only that part of the arbitral award which contains decisions on matters not referred to arbitration may be set aside; or

v. The compositions of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless that agreement was in conflict with a provision of the Act from which the parties cannot derogate; or failing such agreement, was not in accordance with this Act; or

vi. The making of the award was induced or affected by fraud, bribery, undue influence or corruption;

b. The High Court finds that –

i. The subject matter of the dispute is not capable of settlement by arbitration under the law of Kenya; or

ii. The award is in conflict with the public policy of Kenya;

(3) 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.

[12]And for the purposes of the Arbitration Act, Section 6 thereof stipulates that:

(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.

(2) Proceedings before the court shall not be continued after an application under subsection (1) has been made and the matter remains undetermined.

(3) If the court declines to stay legal proceedings, any provision of the arbitration agreement to the effect that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.

[13] As has been pointed out herein, the referral herein was not made 3 years after the filing of this suit and was made pursuant to Order 46 Rule 1 of the Civil Procedure Rules.That provision recognizes that:

"Where in any suit all the parties interested who are not under disability agree that any matter in difference between them in such a suit shall be referred to arbitration, they may, at any time before judgment is pronounced, apply to the court for an order of reference."

And so it was that, on the 7 November 2012, an order was made, three or so years after this suit was instituted, for the dispute to be referred to arbitration; whereupon these proceedings were stayed pending the outcome of the arbitration.It is instructive that Order 46 of the Civil Procedure Rules also provides for the setting aside of award. In particular, in Rule 16 of that Order, it is stipulated that:

"(1) The court may set aside an award on the following grounds only--

(a) corruption or misconduct of the arbitrator or umpire; or

(b) that either party has fraudulently concealed any matter which he ought to have disclosed, or has willfully misled or deceived the arbitrator or umpire."

[14] Accordingly, the question to pose is whether the application for setting aside award ought to be decided from the standpoint of Section 35of the Arbitration Act or Order 46 Rule 16 of the Civil Procedure Rules. In my careful consideration, having opted for the arbitration option, and notwithstanding the stage of the proceedings when the referral order was made, the parties brought themselves under the special regime of law that is set out in the Arbitration Act; and therefore any intervention by High Court can only be called for in accordance with the provisions of Part VI of the Arbitration Act. I would thus be of the same mind as Ngugi, Jin Nancy Nyamira vs. Archer Dramond Morgan Ltd [2012] eKLR that:

"...the Court rejects the Defendant’s invitation to supersede the Arbitration under Order XLV[now Order 46]...it is the opinion of the Court that that Order has itself been, to the extent of any inconsistency, been overturned by the Arbitration Act. The Arbitration Act is primary legislation while Order XLV is subsidiary legislation: to the extent of conflict, the primary legislation trumps. In this case, the Arbitration Act provides very specific and exhaustive grounds upon which an arbitral award can be set aside..."

[15] Indeed, in the case of Anne MumbiHinga vs. Victoria Njoki Gathara [2009] eKLR,the Court of Appeal held that:

"...the Civil Procedure Act and rules do not apply to arbitral proceedings because Section 10 of the Arbitration Act makes the Arbitration Act a complete code and rule 11 of the Arbitration Rules cannot override Section 10 of the Arbitration Act which states:

“Except as provided in this Act no court shall intervene in matters governed by this Act”.

In the light of the above, the superior court did not havejurisdiction to intervene in any manner not specifically provided for in the Arbitration Act. This includes entertaining the application the subject matter of this appeal and all the other applications purporting to stay the award or the judgment/decree arising from the award ... The provisions of the Arbitration Act make it clear that it is a complete code except as regards the enforcement of the award/decree where Arbitration Rules 1997 apply the Civil Procedure Rules where appropriate. In our view, Rule 11 of the Arbitration Rules 1997 has not imported the Civil Procedure Rules line, hook and sinker to regulate arbitrations under the Act. It is clear to us that no application of the Civil Procedure Rules would be regarded as appropriate if its effect would be to deny an award finality and speedy enforcement both of which are major objectives of arbitration. It follows therefore all the provisions invoked except Section 35 and 37 do not apply or give jurisdiction to the superior court to intervene and all the applications filed against the award in the superior court should have been struck out by the court suomotu because jurisdiction is everything as so eloquently put in the case of Owners of the Motor Vessel “Lillian S” vs Caltex Oil (Kenya)Ltd[1989] KLR 1. "

[16]The foregoing being my view, the only issue to consider is whether the Defendant's application falls within the strictures of Section 35 aforestated. As was rightly observed by Counsel for the Plaintiff in her submissions, the Defendant did not state with specificity which ground or grounds of Section 35 of the Arbitration Act the application was brought under; and having carefully considered the grounds set out in the Notice of Motion dated 31 October 2016 as well as the averments in the Supporting Affidavit filed therewith, I am unable to find any ground that would have the effect of placing the application under the clear provisions of Section 35(2)(a) or (b) of the Arbitration Act. The closest the Defendant came to Section 35(2)(a)(vi) of the Act was by alleging undue influence and bias in the submissions, which in any event was not proved by any tangible evidence. In the main, the application as presented appears to target the merit of the decision of the Arbitrator, which the Court has no jurisdiction to reconsider, for the reasons set out herein above. Thus, I would in this respect endorse the reasoning of Ransley, J.in Mahican Investments Limited and 3 others vs Giovanni Gaida& 79 Others [2005] eKLR that:

"A court will not interfere with the decision of an 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 the 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."

[17]The foregoing being my view of the matter, it is my resultant finding that the Defendant's application dated31 October 2016is devoid of any merit. The same is hereby dismissed with costs.

[18] The Plaintiff's application dated 15 September 2016 seeks that the Court be pleased to enter judgment in accordance with the Award delivered by Arbitrator Calvin Nyachoti on 6 September 2016; and that the costs of the application be borne by the Defendant.The application is premised on the affidavit annexed thereto sworn by Ms. WanjikuIthondeka, sworn on 15 September 2016, in which she averred that pursuant to an application filed on 9 June 2010 by the Defendant, the Court issued orders on 7 November 2012 directing that the dispute be referred to arbitration and that the proceedings herein be stayed in the interim. That thereupon, the parties proceeded to arbitration before Hon. Arbitrator, Mr. Calvin Nyachoti, who delivered his Award on 6 September 2016. She thus urged the Court to adopt the said Award, a copy whereof was attached to the Supporting Affidavit.

[19] In response to the application, the Defendant relied on the affidavit of its Managing Director, Mr. Mike Scanlon, sworn on 10 February 2017, which is essentially a reiteration of the averments made in support of the Defendant's application dated 31 October 2016; namely that the application to set aside award raises pertinent issues as to the irregularity of the Award; and that the award was marred with bias and did not serve justice to the Defendant as its evidence was not given consideration by the Arbitral Tribunal. As noted herein above, Counsel did not file any written submissions in respect of the Plaintiff's application.

[20] The application was brought pursuant to Order 46 Rule 18 of the Civil Procedure Rules, and rightly so because it is for enforcement. Having found that the Defendant's application for setting aside the Award has no merit, I find no reason as to why judgment should not be entered in terms of the Award as prayed by the Plaintiff. Accordingly, the application dated 15 September 2016 is hereby allowed and Judgment is hereby entered in accordance with the Arbitral Award delivered by Arbitrator Calvin Nyachoti on 6 September 2016. It is further ordered that the costs of the application be borne by the Defendant.

Orders accordingly.

DATED SIGNED AND DELIVERED AT NAIROBI THIS 7TH DAY OF SEPTEMBER, 2017

OLGA SEWE

JUDGE