https://new.kenyalaw.org/akn/ke/judgment/kemc/2026/178

Ndururu v Green Dairy (K) Ltd & 4 others (Civil Suit E068 of 2026) [2026] KEMC 178 (KLR) (24 June 2026) (Ruling) Neutral citation: [2026] KEMC 178 (KLR) Republic of Kenya In the Chief Magistrate's Court (Milimani Law Courts) Civil Suit E068 of 2026 LA Mumassabba, PM June 24, 2026 Between Olivia Watsemwa Ndururu Plaintiff and Green Dairy (K) Limited 1st Defendant Aberdare Spa & Safari Lodge Limited 2nd Defendant The Elmer Naivasha Resort & Spa Limited 3rd Defendant George Macharia Kariuki 4th Defendant Caroline Nyawira Murage 5th Defendant Ruling Introduction 1.Before this Court is the Notice of Preliminary Objection dated 3rd March 2026 by the 1st to 5th Defendants. The objection challenges the competence of the Plaintiff's suit and the jurisdiction of this Court on the ground that the dispute arises from a Binding Agreement for Fractional Sub-Lease dated 24th May 2016 containing a multi-tier dispute resolution mechanism requiring parties to first pursue amicable settlement, mediation and thereafter arbitration. 2.The Defendants contend that by filing the suit without first exhausting the contractual dispute resolution mechanism, the Plaintiff violated Clauses 15.1 and 15.2 of the Agreement and Section 6 of the Arbitration Act, No. 4 of 1995. They urge the Court to strike out or dismiss the suit with costs. 3.The Plaintiff opposes the objection and contends that the Defendants waived any right to rely on the arbitration clause by entering appearance and filing a Statement of Defence without first seeking a stay of proceedings under Section 6 of the Arbitration Act. The Plaintiff further maintains that the agreement was rescinded following the Defendants' prolonged breach and failure to complete the project. Background 4.The Plaintiff instituted this suit seeking recovery of Kshs. 5,600,000/= being monies paid towards the purchase of two fractional shares in Cottage No. 8B within a resort development project in Naivasha pursuant to a Fractional Sub-Lease Agreement dated 24th May 2016. 5.The Plaintiff alleges that the Defendants represented that the project would be completed within eighteen months. She avers that despite payment of the purchase price and repeated assurances regarding completion of the development, the Defendants failed to complete the project, furnish completion documents or hand over possession of the property. 5.Consequently, the Plaintiff rescinded the agreement and filed the present suit seeking refund of the monies paid together with interest and costs. 6.The Defendants filed a Statement of Defence dated 3rd March 2026 denying liability and subsequently raised the present Preliminary Objection. Submissions 7.The Defendants submit that the dispute is governed by Clauses 15.1 and 15.2 of the Agreement which provide for amicable negotiations, mediation and arbitration. They argue that the Plaintiff was contractually bound to exhaust these mechanisms before approaching the Court. 8.The Defendants rely on the principle of party autonomy and authorities emphasizing the obligation of courts to respect arbitration agreements and contractual dispute resolution mechanisms. 9.The Plaintiff submits that the Defendants lost the right to rely on the arbitration clause by filing a Statement of Defence without first seeking stay of proceedings under Section 6 of the Arbitration Act. She argues that filing a defence amount to submission to the jurisdiction of the Court and is inconsistent with a request for referral to arbitration. Analysis And Determination 10.Having considered the pleadings, the objection and the submissions on record, the issues for determination are:a)Whether the Preliminary Objection raises a proper point of law.b)Whether the Defendants properly invoked Section 6 of the Arbitration Act.c)Whether the Defendants waived their right to insist on Arbitration.d)Whether the Court should nevertheless promote alternative dispute resolution under Article 159(2)(c) of the Constitution.e)Who should bear costs. a. Whether the preliminary objection raises a proper point of law 11.The law governing preliminary objections was settled in Mukisa Biscuit Manufacturing Co. Ltd -Vs- West End Distributors Ltd [1969] EA 696. A Preliminary Objection must raise a pure point of law capable of disposing of the matter without the need for evidence. The issue of jurisdiction founded upon an arbitration clause is undoubtedly a point of law and therefore properly taken as a preliminary objection. 12.Whether the Defendants properly invoked Section 6 of the Arbitration ActSection 6(1) of the Arbitration Act provides:“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." 13.The provision imposes two mandatory requirements:First, a party seeking to enforce an arbitration agreement must make an Application for stay of proceedings.Second, such application must be made not later than the time of entering appearance or otherwise acknowledging the claim. 14.The record before Court reveals that the Defendants entered appearance and proceeded to file a Statement of Defence dated 3rd March 2026. No application seeking stay of proceedings and referral to Arbitration was filed. 15.Instead, the Defendants filed a substantive defence and simultaneously sought to challenge jurisdiction through a Preliminary Objection. b. Whether the defendants waived their right to insist on arbitration 16.The Court of Appeal has consistently held that filing a defence constitutes acknowledgment of a claim and amounts to submission to the jurisdiction of the Court. 17.In Corporate Insurance Company Ltd -Vs- Wachira [1995-1998] 1 EA 20, the Court held that a party wishing to rely on an Arbitration agreement must apply for stay before taking any further step in the proceedings. 18.In Niazsons (K) Ltd -Vs- China Road & Bridge Corporation [2001] KLR 12, the Court held that a party loses the right to seek a stay where it takes steps inconsistent with reliance on an arbitration clause. 19.More recently, in the Court of Appeal Adrec Limited -Vs-Nation Media Group Limited [2017] eKLR, emphatically stated: “The right to seek and obtain stay of proceedings under Section 6(1) of the Arbitration Act is lost the moment a defence is filed in the proceedings." 20.Similarly, in Eunice Soko Mlagui -Vs- Suresh Parmar & 4 Others [2017] eKLR, the Court reaffirmed that filing a defence amounts to acknowledgment of a claim and submission to the Court's jurisdiction.This Court is bound by those decisions. 21.The Defendants voluntarily filed a Statement of Defence responding to the merits of the Plaintiff's claim. Having elected to invoke the jurisdiction of the Court for determination of the dispute, they cannot thereafter insist that the Court lacks jurisdiction. 22.The filing of a Defence and insistence on Arbitration are mutually inconsistent positions. 23.The Court therefore finds that by filing a Statement of Defence without seeking a stay under Section 6 of the Arbitration Act, the Defendants waived their right to insist on arbitration. c. Whether the court should nevertheless promote ADR 24.The dismissal of the Preliminary Objection does not mean that the Court should ignore the constitutional imperative to promote alternative dispute resolution. 25.Article 159(2)(c) of the Constitution provides that in exercising judicial authority, courts shall promote alternative forms of dispute resolution including reconciliation, Mediation, Arbitration and traditional dispute resolution mechanisms. 26.The Court has carefully considered the nature of the dispute before it. The dispute arises from a commercial investment relationship that has existed between the parties for nearly a decade. It concerns a failed development project, alleged breach of contractual obligations, claims for refund of monies paid and issues that may benefit from a less adversarial resolution process. 27.The Court is alive to the fact that litigation should, where possible, be a forum of last resort. The constitutional vision embodied in Article 159 encourages courts not merely to adjudicate disputes but also to facilitate their just, expeditious and proportionate resolution. 28.Accordingly, while this Court cannot compel Arbitration after the Defendants waived the statutory right to invoke it, the Court retains the inherent power and constitutional mandate to encourage consensual dispute resolution mechanisms. 29.In the circumstances of this case, the interests of justice would best be served by affording the parties an opportunity to explore mediation or any other consensual ADR mechanism before the matter proceeds to a full trial. Findings 30.The Court therefore makes the following findings:a)The Preliminary Objection raises a proper point of law.b)The Defendants failed to invoke Section 6 of the Arbitration Act in the manner prescribed by law.c)By filing a Statement of Defence without first seeking stay of proceedings, the Defendants waived their right to insist on arbitration.d)The Preliminary Objection is devoid of merit and cannot succeed.e)Nevertheless, the Court remains obligated under Article 159(2)(c) of the Constitution to promote alternative dispute resolution. Conclusion 31.Having carefully considered the Notice of Preliminary Objection, the pleadings, the parties' respective submissions, the applicable law, and the authorities cited, this Court is persuaded that the Defendants did not invoke the Arbitration clause in the manner prescribed under Section 6 of the Arbitration Act. By filing a Statement of Defence and thereby responding to the merits of the Plaintiff's claim without first seeking a stay of proceedings, the Defendants submitted themselves to the jurisdiction of this Court and relinquished their right to insist on Arbitration as a mandatory precondition to the continuation of these proceedings. 32.Accordingly, the Court finds that the Preliminary Objection is devoid of merit and cannot be sustained. 33.That notwithstanding, this Court remains mindful of the constitutional command under Article 159(2)(c) of the Constitution, which obligates courts to promote alternative forms of dispute resolution, including Mediation and Arbitration, where appropriate. The dispute before the Court emanates from a commercial relationship spanning several years and involves issues that may be amenable to a negotiated settlement. In the interests of substantive justice, proportionality, and efficient resolution of disputes, the Court considers it appropriate to encourage the parties to explore consensual dispute resolution mechanisms before the matter proceeds to a full hearing. DispositionIn the premises, the Court makes the following orders:a)The Notice of Preliminary Objection dated 3rd March 2026 is hereby dismissed.b)The Court finds and holds that it is properly seized of jurisdiction to hear and determine the Plaintiff's claim.c)Notwithstanding the dismissal of the Preliminary Objection, and in furtherance of Article 159(2)(c) of the Constitution, the parties are directed to participate in Court-Annexed Mediation or such other mutually agreed alternative dispute resolution mechanism within forty-five (45) days from the date of this ruling.d)Upon the lapse of the said period, the matter shall be mentioned on 12th August ,2026 for purposes of confirming compliance and receiving a report on the outcome of the Mediation or ADR process.e)Should the parties fail to resolve the dispute through mediation or any other agreed ADR mechanism, the suit shall thereafter proceed to hearing and determination on its merits before this Court.f)The costs of the Preliminary Objection are awarded to the Plaintiff.30 Days Right to file an Appeal. RULING DATED, READ, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI VIA MICROSOFT TEAMS PLATFORM THIS 24TH DAY OF JUNE ,2026L.A. MUMASSABBAPRINCIPAL MAGISTRATEIn the Presence of :M/s Bett for the PlaintiffDefendants :AbsentCourt Assistant: Phoebe.