[2022] KEHC 580 (KLR)

Mohamed & another v Mohamed (Civil Suit E010 of 2018) [2022] KEHC 580 (KLR) (Commercial and Tax) (3 June 2022) (Ruling)

Neutral citation: [2022] KEHC 580 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Suit E010 of 2018

A Mshila, J

June 3, 2022

Between

Kassim Mohamud Mohamed

1st Plaintiff

Hassan Mohamud Mohamed

2nd Plaintiff

and

Mohamed Koriyow Mohamed

Defendant

Ruling

Background 1. There are two Applications for the Court’s determination. The first Application is a Notice of Motion dated 30th July 2021 brought under Sections 36 and 37 of the Arbitration Act and Sections 1A 1B and 3A of the Civil Procedure Act. The Applicant sought the following orders;a.The Final Award made by the Arbitrator Mr. Anthony Milimu Lubulellah on 9th April, 2021 and received by the Applicants' Advocates on 21st July, 2021 be recognized as binding and be adopted as a Decree of the Court.b.The costs of this Application be borne by the Respondent.

2. The Application was supported by the sworn Affidavit ofHassan Mohamud Mohamedwho stated that the Final Award sought to be enforced as a Decree is a domestic award of an Arbitrator appointed by the Chartered Institute of Arbitrators and as such it ought to be recognized as binding.

3. Further, the Applicants have furnished a Certified Copy of the Final Award duly filed herein together with a Certified Copy of the Memorandum of Claim filed with the Sole Arbitrator.

4. The second Application by the Defendant is a Notice of Motion dated 6th August 2021 brought under Section 1A, 1B and 3A of the Civil Procedure Act, Section 35 (1), (2), (3) of the Arbitration Act 1995 and Article 50 of the Constitution of Kenya. The Applicant sought the following orders;a.Pending the hearing and determination of this Application inter partes, the Court does issue an order staying any Application by the Plaintiffs herein to adopt the award as the Judgment of the court the final award of the Arbitrator Mr. Anthony M. Lubulellah made and Published on the 9th day of April 2021 and received by the Defendant herein on the 21st day of July 2021;b.The court does set aside the final award of the Arbitrator Mr. Anthony M. Lubulellah made and Published on the 9th day of April 2021 and received by the Defendant herein on the 21st day of July 2021 and dismiss the Plaintiff’s Application herein for adoption and enforcement of the award;c.The Court grants any other order that it deems fit in the circumstance and in the interest of justice.

5. The Application was supported by the sworn Affidavit of Mohamed Koriyow Mohamed who stated that the Award of the arbitrator went beyond the scope of the arbitration Agreement as the Arbitrator determined matters that were not up for determination before him as opposed to confining himself to the Arbitration agreement. The Arbitrator unlawfully attempted to re write the agreements between the parties. Thus, the Arbitrator went outside his scope to investigate and make findings on the Pre-Contract negotiations and agreements between the Defendant herein and third parties.

Applicant’s Case 6. The Applicant submitted that parties became aware of the Arbitral Award on 9th April, 2021 when they were served with the Arbitrator’s Letter dated 9th April, 2021 informing parties that the Final Award is published and ready for collection upon payment of the balance of Arbitration Fees. It is apparent that that the Defendant herein took more than 3 months to file an Application for setting aside the award without seeking requisite leave to file the same out of time contrary to Section 35 (3) of the Arbitration Act. (See the decision in Mahinder Singh Channa –vs- Nelson Muguka & Another[2007] eKLR)

7. Section 35 (2) of the Act uses deliberately chosen words to leave no room for doubt that an Arbitral Award can only be set aside if the conditions specified therein are established. It is the Applicants’ submission that, an Applicant who fails to fit his application into any of the aforesaid conditions cannot succeed in having an arbitral award set aside.

8. It was the Defendant’s case is that the Arbitrator went beyond the scope of the Arbitration Agreement as he determined matters that were not up for determination before him as opposed to confining himself to the Arbitration Agreement and that the Arbitrator unlawfully attempted to rewrite the agreement between the Parties. On this ground, the Applicants argued that the Defendant has not given the specific instances where he feels that that the Arbitrator went beyond the scope of the Agreement.

9. It was the Applicants’ submission that the parties herein formed the issues for determination during the Arbitration and it is only based on those issues, pleadings on record and the oral submissions that the Arbitrator arrived at the Final Award. It is on that reason that this ground must fail. The Applicants relied on the case of Mahican Investments Limited & 3 Others v Giovanni Gaida & 80 Others [2005] eKLR where the court observed that for such an application to succeed, the application must show beyond doubt that the Arbitrator has gone on a frolic of his own to deal with matters not related to the subject matter of the dispute.

10. The Applicants prayed that the Final Award made by the Arbitrator Mr. Anthony Milimu Lubulellah on 9th April, 2021 and received by the Applicants’ Advocates on 21st July, 2021 be recognized as binding and be adopted as a Decree of this Honourable Court

Respondent’s Case 11. It was the Respondent’s submission that the Award was handed over to the Parties on the 21st Day of July 2021 even after the Parties had already cleared the requisite Charges of the Arbitrator. The Defendant herein paid his portion of the Arbitrators fees on the 26th April 2021 while the Plaintiffs paid their portion of the Arbitration Charges on the 6th July 2021.

12. The Respondent argued that the guiding word in Section 35(3) of the Arbitration Actis receipt of the award by the parties. It is only by receipt of the award that a party is able to know the contents of an award by the arbitration tribunal. The Plaintiff have argued that time should run from the time that the Arbitrator stated that the award was ready for collection without disclosing to court that they actually delayed in paying the Arbitration fees to the Arbitrator meaning that the Arbitrator could not release the award without receipt if his full fees.

13. The Defendant paid its portion of the arbitrator’s fees well within time on the 26th April 2021 while the Plaintiffs paid the arbitrators fees on the 6th July 2021 three (3) months after being informed that the decision was ready. Even then the Arbitration Tribunal again took a further Fourteen (14) days to release the award to the parties on the 21st day of July 2021. Time started running from the 21st July 2021 which was the time for the receipt of the award. If the Act would have meant that time runs from the time of Publishing the award, then the same would have been plain and clear in the act. The Respondent relied on the case of Dewdrop Enterprises Ltd versus Harree Construction Ltd [2009] eKLR where the court held that time started running from the date of publication as the arbitrator had withheld publication of the said award.

14. The Award of the Arbitrator went beyond the scope of the arbitration Agreement as the Arbitrator determined matters that were not up for determination before him rather than confine himself to the Arbitration agreement. In this respect the Arbitrator proceeded to grant interest of 14% on the award to the Plaintiffs without laying a basis of doing so and far besides the scope of matters to be dealt with in the arbitration agreement.

15. The Arbitrator unlawfully attempted to re write the agreements between the parties by purporting to change the agreement which had express terms that it was an investment agreement and defined it as a sale agreement. The Arbitrator acted outside his scope of reference in making findings on oral agreements entered into by the parties herein and then choosing to believe Plaintiffs version of oral agreements entered into by the parties and choosing to disbelief any evidence by the Defendant and his witness.

16. The Arbitrator acted outside his scope to investigate and make findings on the Pre-Contract negotiations and agreements between the Plaintiff and third parties when it made determinations on matters of fact on the parcels of land the subject of the agreement herein. Having held that the Defendant was not in a position to pass any interest in registerable property to the Plaintiffs herein, the arbitrator then had ousted his jurisdiction as his finding made the arbitration agreement unenforceable hence null and void and hence he could not proceed to determine any other issues as relates to the said agreement.

Issues for Determination 17. The Court has considered both Applications, the responses therewith and the written submissions. The issues framed for determination are;a.Whether the Application to set aside is a competent one properly filed in accordance with the provisions of the Arbitration Actand the Arbitration Rules, 1997?b.Whether the Arbitral Award should be adopted as a Decree of the Court?

Analysis Whether the Application to set aside is a competent one properly filed in accordance with the provisions of the Arbitration Act and the Arbitration Rules, 1997; 18. The Applicant submitted that the Arbitrator went beyond the scope of the arbitration Agreement and determined matters that were not up for determination before him rather than confining himself to the Arbitration agreement. The Arbitrator proceeded to grant interest of 14% on the award to the Plaintiffs without laying a basis of doing so and went far beyond the scope of matters to be dealt with in the arbitration agreement.

19. The above mentioned ground forms the basis of the Applicant’s Application seeking to set aside the Arbitral Award.

20. Before delving into the main issues for determination before this Court, it is important to establish whether the Application herein is a competent one properly filed in accordance with the provisions of the Arbitration Actand the Arbitration Rules, 1997;

21. The Respondent/Plaintiffs herein contended that the Applicant/Defendant herein took more than 3 months to file an Application for setting aside the award without seeking the requisite leave to file the same out of time contrary to Section 35 (3) of the Arbitration Act.

22. Section 35(3) of the Arbitration Actstates as follows:“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.”

23. It is not disputed that the parties became aware of the Arbitral Award on 9th April 2021 when the Arbitrator served them with a letter informing the parties that the final award is published and ready for collection upon payment of the Arbitrator’s fees.

24. What then is the legal position regarding the time for filing the Application to set aside the award under Section 35 of the Act? When does time start running?

25. In Transworld Safaris Limited v Eagle Aviation Limited and 3 Others H.C Misc. Application No. 238 of 2003(UR), the court after reviewing various decisions, expressed the view that:“Enlightened by the above wisdom I would like to reiterate that the word delivery and receipt in Section 32(5) and section 35 must be given the same meaning as above, a notice to the parties that an award is ready is sufficient delivery. The interpretation of communication under Section 9 of the Arbitration Actreinforces this view. Any other construction would introduce unnecessary delays in the arbitral process and deny it the virtue of finality.”

26. This position was reiterated in the case of Mahican Investments Limited and 3 Others v Giovanni Gaida and 80 Others [2005] eKLR. The Court was of the view that “received” for purposes of the Act means notification of the award, the courts have held that the object of speedy resolution of disputes and finality of the arbitral award under the UNCITRAL Model Law on International Commercial Arbitration is paramount. In Mahinder Singh Channa vs. Nelson Muguku & Another ML HC Misc. Application No. 108 of 2006 [2007] eKLR, the court observed as follows:“Publication is something which is complete when the arbitrator becomes functus officio but so far as the time for moving under the statute is concerned, it is the notice that matters. It is wholly untenable that the time would not begin to run for a wholly indefinite period if neither side takes up the award. There it would lie in the offices of the arbitrator for months or even years and when finally taken up, the party would be able to say, the period has only just started to run and the fact that he could have had his award by walking round the corner at any moment from the date upon which he received notice of its availability cannot be held against him. Such a construction of the rule appears to be entirely unreasonable. It has never been applied and there is no reason to hold that it applies now … As the parties in this matter were aware that the award was published and this information was supplied to the applicant after it made an inquiry as to the effective date of publication of the award, the letter stating that the award had been issued cannot change the earlier factual and legal position. Any other interpretation or holding would result in dilatory tactics that would defeat the arbitral process denying it of the virtues associated with it such as speed and cost effectiveness…”

27. This court is of the view that the import of Section 35(5) of the Act is that an Application to set aside must be made within 3 months from the date the award is received and for this purpose, the date of receipt is the date which the parties are notified of the award.

28. In this case, the parties were notified of the Award on 9th April 2021 and therefore, time begun to run from this date meaning that the Applicant ought to have filed the application to set aside latest by about 9th July 2021. The application to set aside the award, having been filed on 6th August 2021, this court is satisfied that it is not properly before the court as it was filed out of time.

Whether the Arbitral Award should be adopted as a Decree of the Court; 29. Section 32A of the Arbitration Actprovides that an Arbitral Award is final and is binding upon the parties; while Section 36(1) of the Arbitration Actprovides as follows: -“36. (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.”

30. The award was made pursuant to the matter referred for arbitration by the court on the basis of the arbitration Clause 8 of the Agreement of 27th August 2015 entered into between the parties. The Applicant annexed a certified copy of the award.

31. The court is satisfied that the application is not impeded by any application to set it aside and finds that it is properly before this court and is merited. The Arbitral Award dated 9th April 2021 is hereby recognized and adopted as an order of the court for purposes of enforcement.

Findings and Determination 32. In the light of the forgoing reasons this court makes the following finding and determination;(i)The application to set aside the Final Award is found to have been filed out of time; thus the application is found to be incompetent as it is not properly before this court and it is hereby struck out with costs to the Respondent;(ii)The Arbitral Award dated 9th April, 2021 is hereby recognized as binding and enforceable on the parties and is hereby adopted as an order of this Court;(iii)On this 2nd application each party to bear their own costs.

Orders Accordingly.DATED, SIGNED AND DELIVERED ELECTRONICALLY AT NAIROBI THIS 3RDDAY OF JUNE, 2022. HON. A. MSHILAJUDGEIn the presence of;Mr. Webale for the DefendantsMr. Sirma for the PlaintiffsLucy-----------------Court Assistant