[2018] KEHC 10054 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL & ADMIRALTY DIVISION

MISC. CIVIL APPLICATION N0. 422 OF 2015

IN THE MATTER OF THE APPLICATION BY JOHN WANYONYI TOYWA AND 311 OTHERS FOR THE RECOGNITION AND ENFORCMENT OF AN ARBITRAL AWARD

AND

IN THE MATTER OF THE ARBITRATION ACT 1995 (AS AMENDED BY THE ARBITRATION (AMENDMENT) ACT NO 11 OF 2009

AND

IN THE MATTER OF AN ARBITRATION

BETWEEN

JOHN WANYONYI TOYWA AND 311 OTHERS........CLAIMANTS

VERSUS

EPCO BUILDERS LIMITED.......................................RESPONDENT

RULING

[1] Before the Court for determination is the Chamber Summons dated 9 May 2017. It was filed herein on 16 May 2017 by the Applicants under Section 3A of the Civil Procedure Act, Chapter 21 of the Laws of Kenya, Section 36(1) and (3) of the Arbitration Act, 1995 and Rule 9 of the Arbitration Rules, 1997, and all other enabling provisions of the law, for the following orders:

[a]Spent

[b] Spent

[c]That the arbitral award published on 13 August 2015, and filed herein, be recognized as binding on the parties, and that the same be adopted as an order of the Court;

[d]That the Court be pleased to grant leave for the enforcement of the arbitral award herein as a decree of the Court;

[e] That the costs of the application be provided for.

[2]The application was supported by the two affidavits of John Wanyonyi Toywaannexed thereto, sworn on 9 May 2017and15 September 2017. The affidavits were sworn by Mr. Toywa, not only on his behalf, but also on behalf of the other 311 Applicants who were parties to the arbitral proceedings and the Final Award that is the subject matter of this application. It was the averment of Mr. Toywa that, by individual Agreements for Sale signed between the Respondent and the Applicants, the Respondent offered for sale to the Applicants, by way of sub-lease either a two-bedroomed or a three-bedroomed housing unit, which had been developed by the Respondent on Land Reference No. 9042/229, Land Reference No. 9042/230 and Land Reference No. 9042/18, situate in Embakasi, Nairobi. A dispute subsequently arose between the parties which was, in accordance with the Agreements for Sale, referred to the arbitration of Mr. Martin Munyu. The Arbitrator accordingly took proceedings before him and thereafter made and published his award dated 13 August 2015 in favour of the Applicants. A certified copy thereof was annexed to the Supporting Affidavit as Annexure "JWT-2". It is that award that the Applicants would like to have adopted and enforced.

[3] In its Replying Affidavit sworn by Ramji Devji Varsani on 28 July 2017, the Respondent opposed the application and averred that it entered into a turn-key project agreement with Kenya Airways Limited by which it was to build 312 housing units and other amenities for the staff of Kenya Airways Ltd (Kenya Airways). A copy of the Housing Project Agreement dated 16 October 2009 was annexed to the Replying Affidavit and marked Annexure "RDV 2".It was the contention of the Respondent that, after the signing of the agreement, Kenya Airways delayed for two years in handing over the site to the Respondent; and that because of this delay the price of the housing units was seriously undermined by inflation. That in addition, Kenya Airways placed caveats on the subject titles, which caveats remain in place to date and are the subject of a related dispute between Kenya Airways and the Respondent. Copies of the Titles were exhibited and marked Annexure "RDV 3(a), (b) and (c)".

[4]It was further the contention of the Respondent that, in order to undertake the construction, it was agreed, vide Clause 2(a) of the Housing Project Agreement, that it would take up a mortgage from a financier. Accordingly, it took up a term loan facility of Kshs. 800,000,000/= supported by a mortgage in the same amount and a drawdown sum of Kshs. 645,350,000/=. The balance of the construction costs, land and other related costs were to be met from its internal resources/other borrowings. Thus, it was the contention of the Respondent that, despite the challenges caused by the delays occasioned by Kenya Airways, it undertook the construction, albeit at a higher price, thereby ultimately suffering loss in the estimated sum of Kshs. 223,400,000/= as expressed in Annexure RDV 5; yet it was Kenya Airways that dictated the terms of sale of the units, including the price. It was thus the contention of the Respondent that the disputes involving the two transactions between the Respondent and Kenya Airways on the one hand, and between the Respondent and the Applicants were so intertwined that they ought to have been determined together by the Arbitrator.

[5]The Respondent further averred that when it raised the issue of the necessity to have Kenya Airways enjoined to the dispute before the Arbitrator, he quickly dismissed it, and thereby ended up with an award that was not only unfair and skewed in favour of the Applicants, but was also in contravention of the public policy of Kenya. Hence, the Respondent urged the Court to employ its jurisdiction, under Section 37(1) of the Arbitration Act, to refuse to enforce the Final Award or certain parts thereof that are either unconscionable or impossible to enforce. For instance, it was the averment of the Respondent that specific performance of the 312 Sale Agreements involving the Applicants is not possible without Kenya Airways removing the caveat placed by it on the titles to the properties under the Housing Project Agreement. The Respondent therefore urged for the dismissal of the Applicant's Chamber Summons application dated 9 May 2017 with costs.

[6] Pursuant to the directions issued by the Court on 11 July 2017, Learned Counsel filed and exchanged written submissions herein, urging their respective positions. The Applicant's written submissions dated 14 September 2017 and filed herein on 15 September 2017, were to the effect that the Applicants, having complied with Section 36(3) of the Arbitration Act, are entitled to the orders sought; and that vide the Supporting and Supplementary Affidavits of John Wanyonyi Toywa, all the requisite documents have been placed before the Court to enable recognition and enforcement of the arbitral award. The documents include duly certified copies of the agreements between the Applicants and the Respondent and a certified copy of the Final Award.

[7] While acknowledging that the Court has powers under Section 37 of the Arbitration Act to refuse to recognize an award, it was the submission of Counsel for the Applicants that none of the grounds set out in that provision has been established herein. In particular, it was submitted that the Respondent's Replying Affidavit only lays out facts that have already been canvassed before the Arbitrator; and that it is trite that the role of the Court, in such instances, is limited by dint of Sections 10, 32A and 35of the Arbitration Act. The Court of Appeal case of DHL Excel Supply Chain Kenya Limited vs. Tilton Investments Limited [2017] eKLR was relied on in support of this proposition. It was thus the contention of the Applicants that all the issues now being raised in connection with the instant application ought to have been raised before the Arbitrator. On the authority of Baseline Architects Limited & 2 Others vs. National Hospital Insurance Fund Board of Management [2008] eKLR, Counsel argued that additional or new evidence cannot be adduced in opposition to an application for enforcement of an arbitral award. It was further submitted that if the Respondent has grievances in connection with the Housing Project Agreement, then those are issues that ought to be, and can still be raised in HCCC No. 167 of 2014: EPCO Builders Limited vs. Kenya Airways Limited.

[8]In connection with Section 35 of the Arbitration Act, Counsel further urged that the issue of the award being against public policy is now res judicata, having been canvassed by the parties and ruled on by the Court in the Ruling dated 31 March 2017. It was further pointed out by Counsel for the Applicants that the Respondent, having filed a Notice of Appeal in connection with the Ruling of the Court by which its application to set aside the award was dismissed, ought to pursue the appeal to conclusion. In conclusion, Counsel urged the Court to find that the application is merited and should therefore be allowed, granted that there is no order of stay of enforcement pending appeal.

[9]Counsel for the Respondent on the other hand, was of the posturing that the Applicants were under duty to ensure that their application passes the test established under Section 37 of the Arbitration Act, an aspect of which is that the award must accord well with the public policy of Kenya. On the basis of the detailed Replying Affidavit sworn by Ramji Devji Varsani, Counsel urged the Court to find that the Final Award is in conflict with public policy in that Specific Performance is impossible due to the caveats lodged by Kenya Airways, which was not a party to the arbitral proceedings. It was pointed out by Counsel that no evidence had been supplied by the Applicants to show that the caveats had been removed, or that Kenya Airways has consented to the subordination of its caveats; and therefore, that it would be impossible to enforce the award even if recognized by the Court, granted the provisions of Section 72(2) of the Land Registration Act, No. 3 of 2012. In effect, it was argued, the Court would be issuing orders in vain.

[10] The second line of argument taken by Counsel for the Respondent was that it would be against public policy for it to be required to specifically perform the 312 contracts without requiring the Applicants to pay land rent, rates and service charge. It was argued that, since the completion date on 5 July 2013, the Respondent has incurred the sum of Kshs. 25,378,080. 41 to maintain the property; an aspect which the award did not deal with. Thus, it was posited that it would not only be unconscionable but also unconstitutional for the contracts to be specifically performed without consideration being given and reparation made for the additional expenses incurred. The case of Evangelical Mission for Africa & Another vs. Kimani Gachuhi & Another [2015] eKLR was cited in support of this argument and in urging the Court to dismiss the Applicant's application with costs.

[11] Having carefully considered the application, the affidavits filed in respect thereof and the annexures thereto, as well as the submissions of the parties, which were highlighted on 11 December 2017, there is no dispute that there was a Housing Project Agreement between the Respondent and Kenya Airways dated 16 October 2009 on the basis of which individual Sale Agreements were made between the Respondent and each one of the 312 Applicants herein. There is no dispute that the project was undertaken to completion by the Respondent and that a Completion Certificate was issued, a copy whereof was annexed to the Replying Affidavit as Annexure RDV 8. Thereafter a dispute arose between the parties with regard to the terms of completion and the contractual obligations of the parties, particularly pertaining to the incidence of escalation of the construction costs. The dispute was accordingly referred to arbitration in accordance with the arbitration clause in the Sale Agreements. The Arbitrator, Mr. Martin Munyu, upon hearing the parties, thereafter made his Final Award on 13 August 2015, and a copy thereof was annexed to the Supporting Affidavit as Annexure "JWT-2".The award was in the following terms:

"Now I, Martin R. Munyu, LLB, FCIArb, having carefully considered all the submissions of the parties contained in the documents submitted to me, the evidence, oral testimony and submissions tendered before me and having delivered my findings and reasons, HEREBY AWARD AND DIRECT as follows:-

1. The Claimant's claim partially succeeds.

2. That it is hereby declared that the purchase price stated in the Sale agreements is the contractual purchase price for the apartments.

3. That an order of specific performance of the Sale agreements be and is hereby issued in favour of the Claimants against the Respondent as outlined in the individual Sale agreements with each Claimant.

4. That the Claimants' prayer for loss of use and revenue be and is hereby dismissed.

5. That the Claimants' prayer for general damages be and is hereby dismissed.

6. The Respondent's Counterclaim fails and is hereby dismissed.

7. The Respondent shall pay the Claimants' recoverable costs together with simple interest at the rate of 14% per annum should such costs remain unpaid thirty (30) days after the quantum of costs has been agreed upon or assessed until full payment. The amount of such costs and interest shall be agreed between the parties and failing agreement be determined by me upon agreement by both parties.

8. submitted to the parties separately from this Award..."

[12] Being dissatisfied with the award, the Respondent filed a Chamber Summons application dated 28 September 2015, seeking its setting aside. That application was dismissed vide the Ruling herein dated 31 March, 2017; whereupon the instant application was filed for enforcement of the award. The application was brought pursuant to Section 36 of the Arbitration Act, which provides that:

"(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.

...

(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."

[13] It is evident, from Annexures "JWT-1" and "JWT-2" that the Applicants have complied with Section 36(3) of the Arbitration Act. Thus, from a plain reading of Rule 6 of the Arbitration Rules, the Applicants would be entitled, even by way of an ex parte application, to leave to enforce the award as a decree of the Court, the application for setting aside award having been dismissed. (see DHA Supply Chain Kenya Limited vs. Tilton Investments Limited [2016] eKLR) Nevertheless, Since Section 36(1) is subject to Section 37 of the Arbitration Act, the only issue that presents itself for determination is whether there is justifiable cause for refusal of recognition or enforcement. In this regard, Section 37 of the Arbitration Act is explicit that:

(1) 0The 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 recognized 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.

(b) if 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 recognition or enforcement of the arbitral award would be contrary to the public policy of Kenya.

(2) If an application for the setting aside or suspension of an arbitral award has been made to a court referred to in subsection (1)(a)(vi), the High Court may, if it considers it proper, adjourn its decision and may also, on the application of the party, claiming recognition or enforcement of the arbitral award, order the other party to provide appropriate security."

[14] None of the grounds set out in Section 37(1)(a)(i) to (vii) aforestated has been alleged or proved by the Respondent; and, the Court having made a ruling in respect of the contention of the Respondent that the Final Award is inimical to the public policy of Kenya, it would follow that there is no basis for the Court to refuse recognition or enforcement. Here is what the Court had to say on the matter in the Ruling aforementioned:

"...an Award that merely sets out to enforce a contract between the parties cannot therefore be said to be inimical to the public policy of Kenya. To the contrary, the Award that is sought to be set aside is in tandem with the constitution and the laws of Kenya in so far as it seeks to endorse and enforce the contractual obligations of the parties herein."

[15] On whether the Applicants would be unjustly enriched at the expense of the Respondent, I have given due consideration to the case of Evangelical Mission for Africa & Another vs. Kimani Gachuhi & Another [2015] eKLR, but not that it is markedly distinguishable from the facts hereof. That decision was in connection with an application for setting aside an arbitral award. In this instance, the Court has already made a determination that the ground of public policy in untenable. Additionally, the Respondent having opted to appeal to challenge the Ruling of the Court cannot be said to be without remedy. Moreover, the main dispute between it and Kenya Airways is still pending as HCCC No. 167 of 2014 wherein it can lay claim to these additional sums it is complaining about.

[16]As to whether an enforcement order would be an order made in vain in view of the caveats registered by Kenya Airways, it is not lost on the Court that the project was initiated by Kenya Airways for its staff and that it registered the caveats to protect the interests of the Applicants. Clause 2(d)of the Housing Project Agreement provided that:

"KQ employees (who have entered into sale agreements with EPCO for purchase of the units) shall register a caveat or caveats against the titles to the Properties (the "Caveats") for the purpose of ensuring that EPCO does not sell the properties to third party and that it complies with the requirement to grant the Right of Refusal."

[17]Moreover, the caveats in issue, exhibited at page 25 of the Replying Affidavit, show that Kenya Airways was staking a claimant's interest pursuant to the Housing Project Agreement dated 16 October 2009,and was keen on "...forbidding any dealing unless the transaction is subject to caveator's claim..." Clearly therefore, the caution as worded would not be incompatible with the interests of the Applicants. In any case, Section 73(1) of the Land Registration Act recognizes that a caution may be removed upon an order of the Court if need be. Accordingly, I am far from persuaded that an order for recognition of the Final Award dated 13 August 2015 would be an order in vain as to be against public policy. To the contrary, it is public policy for the Award to be enforced without further delay to bring this matter to closure. This was aptly stated by Ringera, J. in Christ for All nations vs. Apollo Insurance Co. Ltd [2002] 2 EA 366 thus:

"...the public policy of Kenya leans towards finality of arbitral awards and parties to arbitration must learn to accept awards, warts and all, subject only to the right of challenge within the narrow confines of Section 35 of the Arbitration Act."

[18] In the result, it is my finding that there is no valid reason as to why the Final Award dated 13 August 2015 should not be recognized and enforced. Accordingly, I would allow the Applicants' Chamber Summons application dated 9 May 2017 and grant orders as follows:

[a]That the Final Arbitral Award published on 13 August 2015 be recognized as binding on the parties and that the same be adopted as an order of the Court;

[b]That leave be and is hereby granted for the enforcement of the Final Arbitral Award herein as a decree of the Court;

[e]That each party shall bear own costs of the application.

Orders accordingly.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 16TH DAY OF FEBRUARY 2018

OLGA SEWE

JUDGE