[2021] KEELC 3156 (KLR)

REPUBLIC OF KENYA

IN THE ENVIRONMENT AND LAND COURT OF KENYA

AT MOMBASA

CIVIL APPEAL NO. 23 OF 2020

KENYA PORTS AUTHORITY...........................................................APPELLANT

VERSUS

MEMPHIS LIMITED ......................................................................RESPONDENT

RULING

(Application to dismiss an appeal filed against an arbitration award; argument of the applicant that their arbitration agreement did not provide for a right of appeal and the award must be considered final; parties having entered into a lease of land for which a dispute ensued; the lease agreement making provision for arbitration and further providing that the award of the arbitrator shall be final; parties when before the arbitrator recording a consent providing for a right of appeal; effect of consent recorded in court or before the arbitration tribunal; same must be construed as a further agreement of the parties; irrelevant whether such consent is not in the writing of the parties and not signed by the parties so long as it is properly recorded and signed by the arbitrator; no contention raised that the consent was not the agreement of the parties; parties thus reserved the right of appeal through the said consent; appeal properly before court; application dismissed)

1. The appellant and the respondent entered into a Lease Agreement in which the appellant leased to the respondent the land parcel LR No. MN/VI/4770, for a term of 33 years, from 1 April 2009. Clause 3(g) of the lease agreement partly reads as follows:

“In the event of a dispute or difference between the parties arising out of or in connection with the lease and the same cannot be settled through negotiation by the parties…then the dispute shall be determined by a single arbitrator in accordance with the Arbitration Act of 1995 or any statutory enactment in that behalf for the time being in force. The decision of such an arbitrator shall be final.”

2. Sometime in the year 2017, the appellant allegedly breached the terms of the lease agreement and the respondent instituted proceedings before this court, being Mombasa ELC No. 163 of 2018, Memphis Limited vs Kenya Ports Authority. The appellant later made an application to court vide a chamber summon application seeking for stay of proceedings, and for the dispute to be referred to arbitration in accordance with clause 3(g) of the lease agreement. By consent of the parties, the matter was referred to arbitration, and the proceedings in Mombasa ELC No. 163 of 2018were stayed. The arbitrator published the arbitral award on 15 June 2020, and an additional arbitral award on 18 August 2020. The appellant being aggrieved with the arbitral award, filed an appeal on 4 September 2020.

3. Consequently, the respondent, Memphis Limited (hereinafter also referred to as ‘the applicant’) filed an application dated 22 September 2020, seeking orders to have the entire appeal struck out, or alternatively, be dismissed. There are various grounds listed in support of the application but basically what the applicant is saying is that given Clause 3 (g) of the lease agreement, there is no right of appeal to this court, and thus the arbitration award is final.

4. The respondent opposed the application vide a replying affidavit of Stephen Kyandih, the Principal Legal Officer of the respondent. He deposed that the appeal was well placed before the court because the parties had agreed beforehand, that the arbitral award would be subjected to an appeal on questions of law. Mr. Kyandih further deposed that the parties, through their advocates on record, entered into a consent on 25 January 2019, during their first preliminary meeting with the arbitrator, where they agreed to reserve the arbitral award for an appeal. He referred to Clause 8 of the Order for Directions (OFD) No. 1 which was by consent and which was drawn as follows :-

A dispute having arisen between Parties herein and the Parties having agreed to appoint me as the Sole Arbitrator to hear and determine this matter : the Parties have BY CONSENT agreed as follows :

(8) Parties reserved their right to appeal on matters of law only as provided under section 39 of the Arbitration Act.”

5. Mr. Kyandih deposed that the advocates on record for the parties did not reject or contest the terms of the OFD No. 1. He deposed that the terms of the OFD No. 1 were binding on the parties, and the applicant is specifically bound by the agreement to reserve a right to appeal on points of law against the award.

6. I invited counsel to canvas the matter through written submissions.

7. Mr. Paul Buti, learned counsel for the applicant, in his written submissions, submitted that when the parties entered into the subject lease agreement, they made provision at Clause 3(g) of that lease that: ‘The decision of the arbitrator shall be final”. Counsel referred me to Section 10 and Section 32A of the Arbitration Act, Cap 49, Laws of Kenya to press the point that Courts ought not to interfere with an arbitration award. He submitted that from the wording of the said sections, interference or recourse against an award is not permitted, except as otherwise agreed by the parties. Counsel continued to submit that where parties had not agreed to an appeal there can be no recourse by any party to question the award in court.

8. Counsel further cited Section 3 of the Act in defining a party to an arbitration agreement, and submitted that the parties to the arbitration agreement within the meaning of section 3 is Kenya Ports Authority and Memphis Ltd. He submitted that pursuant to Section 4 of the Act, the arbitration agreement must be in writing and signed by the parties. His point here was that the consent order was not in an arbitration agreement, and was not signed by the parties nor their advocates, thus failing the test of Section 4 (3) of the Act , and could not be regarded as being an agreement of the parties to appeal. He submitted further that because the Lease agreement is registered, it cannot be altered or amended except by the same parties to the lease. He referred me to the Court of Appeal and Supreme Court decisions in Nyutu Agrovet Limited vs Airtel Networks Limited (2015) eKLR and (2019) eKLR; Kenya Oil Company Limited & Another vs Kenya Pipeline Company (2014)eKLR; Kenya Breweries Limited vs Kiambu General Transport Agency Limited (2000)eKLR; Talewa Road Contractors Limited vs Kenya National Highways Authority (2019) eKLR; and KICC vs Greenstay Systems Limited (2018)eKLR. He submitted that in this instance, there was no right of appeal and that the arbitration award was final.

9. On his part, Prof. Githu Muigai, learned counsel for the respondent, commenced his submissions by emphasizing the aspect of party autonomy in arbitration. He submitted that party autonomy continues even after the arbitration agreement containing the arbitration clause. He submitted that only the arbitration agreement has formal statutory requirements and other agreements between the parties regarding procedural elements of their arbitration only require an agreement between the parties. He submitted that parties are at liberty to reserve the right of appeal even after the arbitration agreement pursuant to Section 39 (1) (b) of the Arbitration Act. He submitted that Section 39 (1) (b) does not state that an agreement to appeal be contained in the arbitration agreement. In this instance, he submitted that the agreement to appeal is contained in OFD 1. He referred me to the Agenda of their first meeting with the arbitrator, specifically Agenda 4. 4 “reservation of right to appeal under Section 39 of the Arbitration Act, 1995. ” He submitted that all matters discussed in the agenda were ultimately agreed by consent of the parties including reservation of the right of appeal. He pointed out that no party has ever protested or challenged any part of the consent. He thus pressed the point that the parties agreed to reserve the right to appeal and that this appeal is properly before court. He relied on the cases of Samuel Mbugua Ikumbu vs Barclays Bank Limited (2015) eKLR to urge that a consent entered by counsel binds his client as if that person was himself in the proceedings. Counsel continued to submit on the definition of an arbitration agreement as provided for in Section 4 (2) of the Act. He also relied on the case of Joseph W. Karanja & Another vs Geoffrey Ngari Kuira (2008)eKLR to address the continuing nature of party autonomy.

10. I have considered the matter. The facts herein are really not in dispute. The parties did have a lease which contained an arbitration clause at paragraph 3 (g) thereof which where relevant provides as follows :-

“…If the dispute has not been settled pursuant to the mediation within twenty one (21) days from the date when the mediation was instituted, then the dispute shall be determined by a single arbitrator in accordance with the Arbitration Act of 1995 (Cap 49) or any statutory enactment in that behalf for the time being in force. The decision of such an arbitrator shall be final.”

11. A dispute did ensue and the applicant filed suit before court, which was eventually stayed, so that the parties may proceed to arbitration. The parties agreed to appoint Mr. Ambrose Rachier as arbitrator and he called a preliminary meeting of the parties which had an agenda. Part of that agenda, Agenda 4. 4, concerned the right of appeal. The meeting was held on 25 January 2019, with Mr. Buti, learned counsel, being present for the claimant (Memphis Limited) and Mr. Imende, learned counsel, being present for the respondent (Kenya Ports Authority). What was agreed in that meeting was reduced into a consent which was signed solely by the arbitrator. That consent was then sent to counsel through the letter dated 28 January 2019. I think it is instructive to state that the consent addressed many other matters including a clause 8 which provided as follows :-

Parties reserved their right to appeal on matters of law only as provided under Section 39 of the Arbitration Act.

12. Other matters in that consent include the appointment of a stenographer, the applicable law, the timetable for filing pleadings, and the arbitrators fees.

13. The sole question that arises is whether the above consent binds the parties, in the same manner as the lease agreement which contains the arbitration clause. If it does not, then there would be no right of appeal, but if it does, then there will be a right to appeal, following the provisions of Section 39 (1) (b) of the Arbitration Act, which provides as follows :-

Where in the case of a domestic arbitration, the parties have agreed that –

(a) an application by any party may be made to a court to determine any question of law arising in the course of the arbitration; or

(b) an appeal by any party may be made to a court on any question of law arising out of the award, such application or appeal, as the case may be, may be made to the High Court.

14. I have carefully gone through the supporting affidavit of Mr. Henry Obuya Were. Nowhere does he allege that he did not authorize his advocate to enter into the consent of 25 January 2019 before the arbitrator. Neither does he insinuate that what was recorded as a consent by the arbitrator was actually not an agreement of the parties. In other words, he does not impugn the consent that was recorded. It would of course have been a different matter if he said that “this is not the consent of the parties” but he doesn’t say so. Now, if the applicant does not contest the wording of that consent, I wonder what the problem is. It is trite as was emphasized in the Samuel Mbugua Ikumbu vs Barclays Bank of Kenya Limited case (supra), that consents recorded in the presence of counsel do bind their clients, and this would be as if the client/party himself had entered into that consent. Consents also have an effect similar to that of a contract and it has also been elaborated that a consent can only be set aside for the same reasons that one would set aside a contract. In the Ikumbu case, the Court of Appeal had this to say :-

“The law on variation of consent judgment is now settled. The variation of a consent judgment can only be on grounds that would allow for a contract to be vitiated. These grounds include but are not limited to fraud, collusion, illegality, mistake, an agreement being contrary to the policy of the court, absence of sufficient material facts and ignorance of material facts.”

15. The applicant must be considered a party to the consent for it was entered into by his counsel. The parties did inform the arbitrator that their advocates had their full authority to commit them. I need to emphasise this, that there is no contention by the applicant that what was recorded was not the agreement of the parties. Neither has there ever been an application to set aside the consent while the parties were at the arbitration or even subsequently.

16. In his submissions, Mr. Buti attacked the consent as not being compliant with the provisions of the Arbitration Act, and thus not applicable. I do not agree. The consent was made in writing and it was signed by the person who recorded it. There are many ways in which courts and tribunals record consents. Sometimes the parties themselves file a written consent that they have signed, which is then “adopted” by the court. Other times, the parties themselves, while in court, dictate a consent, which the court records and solely signs. Another variation is that the court records the consent and asks the parties to sign on what is recorded. In my view, all these are acceptable ways of recording consents and none is superior to the other. Just because a consent was signed by the parties does not make it any superior to a consent recorded and signed by the court. What is important is that there is an ad idem, a meeting of the minds, that what is recorded is the agreement of the parties.

17. Nobody has raised issue that what the arbitrator recorded as consent was not the agreement of the parties. The net result is that this must be construed as a further agreement of the parties on the nature of arbitration. For all intents and purposes it was akin to a further arbitration agreement, and in this further or additional agreement, the right to appeal was reserved. A consent recorded in court or before the tribunal has the same import as if it was an agreement of the parties. To say otherwise would be to overturn the whole concept of consents recorded in court or before a tribunal.

18. Mr. Buti in his submissions asserted that an arbitration agreement must conform to Section 4 of the Arbitration Act, which provides as follows :-

Form of arbitration agreement

(1) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(2) An arbitration agreement shall be in writing.

(3) An arbitration agreement is in writing if it is contained in –

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegram, facsimile, electronic mail or other means of telecommunications which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other party.

(4) The reference in a contract to a document containing an arbitration clause shall constitute an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.

19. I see no problem with the consent even when I compare it with Section 4 above. The consent was reduced into writing and was signed by the arbitrator. The arbitrator, when signing that consent, was acting as an agent of both the claimant and the respondent in the arbitration. His recording of the consent and his signing of it was as if the parties themselves had recorded and signed the consent. It thus conformed to the provisions of Section 4 of the Arbitration Act.

20. Mr. Buti’s submissions that an arbitration agreement can only be in the form of another similar agreement hold no water and are unfounded. I am aware that he referred me to the Kenya Oil Company Limited & Another vs Kenya Pipeline Company (supra) Case where a second formal arbitration agreement was signed, this time containing the right of appeal. But this cannot be the only way to record an arbitration agreement. As seen from Section 4 above, the agreement can be through letter, or telex, or facsimile, or other means of telecommunication. It can in fact be inferred through an short mobile telephone message (sms) or even through WhatsApp. What is important is that there is something in writing which points at what the parties have agreed.

21. The case of Talewa Road Contractors vs Kenya National Highway Authority (supra) is distinguishable to what transpired in this case. In Talewa, the parties had a dispute which was referred to arbitration. While before the arbitrator, the parties recorded the following : “The claimant will supply case law before the Right of Appeal, in accordance with section 39, is granted by the Arbitral Tribunal.” The above recording did not give a right of appeal, but in fact, it appears as if it was a matter for later argument or agreement. This is in contrast to what is in this case, where there is a consent by the arbitrator explicitly reserving the right of appeal. The cases of Nyutu Agrovet vs Airtel and KICC vs Greenstar Systems Limitedare also distinguishable. In those two cases, what was in issue was the right to appeal to the Court of Appeal, over the matters set out in Section 35 of the Arbitration Act (which touches on the setting aside of an arbitral award), and not a right of appeal to this court under Section 39 of the Act. They are not therefore applicable to the issues herein.

22. I think I have said enough to demonstrate that I do not find merit in this application. The applicant did agree, while at the arbitral tribunal, that there would be a right to appeal on matters of law. The applicant cannot be allowed to run away from the very consent that she entered into. To allow that would be against public policy and will negate the essence of parties entering into consents. I therefore find that this appeal is properly before this court and I will proceed to hear at.

23. I proceed to dismiss this application with costs to the appellant.

24. Orders accordingly.

DATED AND DELIVERED THIS 18TH MAY 2021.

JUSTICE MUNYAO SILA

JUDGE, ENVIRONMENT AND LAND COURT OF KENYA

AT MOMBASA