[2003] KEHC 551 (KLR)

[2003] KEHC 551 (KLR)

The court found that the issue of fraud in the discharge of charge over LR No 3734/103 was properly before the arbitrator, as it was pleaded in the Plaintiff's reply to defence and included in the joint statement of issues for determination. The arbitrator did not exceed his mandate in determining the issue of fraud, and his findings were based on evidence and observations of the disputed documents. However, the court held that the issue of the legality of the second agreement, which was alleged to contravene the Exchange Control Act and Banking Act, was not addressed by the arbitrator. Since the legality of the underlying contract is fundamental to the enforceability of any award, the...

Citation
[2003] KEHC 551 (KLR)
Parties
Plaintiff: Mercantile Finance Company Limited; Defendant: John Wachira Wambugu
Court
High Court
Court Station
High Court at Nairobi (Milimani Commercial Courts)
Jurisdiction
Kenya
Judgment Date
16 May 2003
Case Number
? 266 of 1999
Procedural Posture
Civil Suit / Ruling on Application to Set Aside Arbitral Award
Outcome
Application to set aside arbitral award allowed in part; arbitrator's finding of liability set aside; costs of the application awarded to the defendant.
Legal Topics
Arbitration Awards, Fraudulent Discharge of Security, Illegality of Contract, Jurisdiction of Arbitrator, Setting Aside Award, Public Policy
Source Language
English
Commercial and Corporate Civil Procedure Alternative Dispute Resolution Arbitration Awards Fraudulent Discharge of Security Illegality of Contract Jurisdiction of Arbitrator Setting Aside Award +1 more

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Parties

Mercantile Finance Company Limited

Plaintiff

John Wachira Wambugu

Defendant

Procedural Posture

Civil Suit / Ruling on Application to Set Aside Arbitral Award

Legal Issues

  1. 1 Whether the arbitral tribunal had jurisdiction to determine the issue of fraud in the discharge of charge over LR No 3734/103.
  2. 2 Whether the arbitral award dealt with matters beyond the scope of the reference to arbitration.
  3. 3 Whether the contract underlying the arbitration was tainted with illegality and contrary to public policy.

Ratio Decidendi

The court found that the issue of fraud in the discharge of charge over LR No 3734/103 was properly before the arbitrator, as it was pleaded in the Plaintiff's reply to defence and included in the joint statement of issues for determination. The arbitrator did not exceed his mandate in determining the issue of fraud, and his findings were based on evidence and observations of the disputed documents. However, the court held that the issue of the legality of the second agreement, which was alleged to contravene the Exchange Control Act and Banking Act, was not addressed by the arbitrator. Since the legality of the underlying contract is fundamental to the enforceability of any award, the...

Court Disposition

Application to set aside arbitral award allowed in part; arbitrator's finding of liability set aside; costs of the application awarded to the defendant.

Orders

  • The arbitrator's order holding the defendant liable to the claimant is set aside.
  • The parties shall agree on how to proceed regarding the unresolved issue of illegality of the agreement.