[2023] KEHC 23522 (KLR)

Pindoria Holdings Limited v Tyl Limited (Civil Case 416 of 2015) [2023] KEHC 23522 (KLR) (Commercial and Tax) (9 October 2023) (Ruling)

Neutral citation: [2023] KEHC 23522 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Case 416 of 2015

JWW Mong'are, J

October 9, 2023

Between

Pindoria Holdings Limited

Plaintiff

and

Tyl Limited

Defendant

Ruling

1. Before me is the Defendant’s application dated February 25, 2023 seeking orders that the Honourable Court be pleased to stay the suit herein pending the hearing and determination of the dispute through Arbitration. The Defendant’s application is supported by the affidavit of Boniface Nginyo Mwaura, a manager at the Applicant’s company. The application is opposed and the Plaintiff has filed Grounds of opposition to the Application.

2. The Applicant in bringing this application argues that the matter before this court relates to a dispute that arose out of a contractual relationship between the parties entered into on May 10, 2010 in respect of building works agreement whereby the Plaintiff was contracted by the Defendant to construct a residential house. The Applicant argues that the said contract between the parties contained an arbitration clause under deemed as 'the Arbitration Agreement' that required all disputes arising between the parties be referred to arbitration. The Applicant avers that it was its counsel on record previously who failed to invoke the arbitration clause but instead filed a defence when the Defendant was sued by the Plaintiff. The Applicant urges the court to down its tools at this stage and allow this dispute to be resolved in the manner that parties contracted to do.

3. The Plaintiff opposes the application. In opposing the application, the Plaintiff/Respondent raises two pertinent issues; firstly, that the Defendant already filed a defence to the suit before the court and a witness statement. Secondly and most importantly, parties proceeded with pre-trial process and had the matter was certified ready for trial. As a result, therefore the matter proceeded for trail and the Plaintiff has already presented its case and called all its witnesses and closed it case. What remains now is the Defendant’s case. Halting the matter at this stage and referring it back to arbitration will greatly prejudice the Plaintiff.

4. The second limb of the objection is premised on the law. The application as presently filed seeks to invoke both Order 46 of the Civil Procedure Rules and Section 6 of the Arbitration Act. The Plaintiff argues that Arbitration brought under Order 46 of the Civil Procedure Rules is driven by the court itself which frames the issues for determination by the arbitrator and sets timelines for the hearing and disposal of the same. On the hand, arbitration under section 6 of the Arbitration Act is premised on the Arbitration clause in the disputed contract. Under section 6 of the Arbitration Act, arbitration is triggered immediately the party wishing to have the dispute resolved through arbitration has entered appearance, then the party thereto should move the court to stay the proceedings and refer the matter to arbitration.

Analysis and Determination:- 5. I have considered carefully the rival arguments by the parties and note that only one issue emerges for determination, to wit; 'whether the court should refer the case herein to arbitration.'

6. A perusal of the court file reveals that on August 22, 2015, the Plaintiff filed its plaint seeking for judgment against the Defendant the following:-a.Kshs 52,629,527. 78b.Interest on (a) above at 18% from June 27, 2015 until payment in full.c.Costs of this suit.d.Such further on other relief which the Honourable Court may deem fit to grant.

7. Subsequently on September 18, 2015, the Defendant filed its Memorandum of Appearance and September 23, 2015 filed its defence seeking to have the Plaintiff’s suit struck out. Several preliminary applications were heard and determined and on July 1, 2020 after calling a total number five (5) witnesses, the Plaintiff closed its case. Since then, the matter has come up several times for defence hearing but for one reason or another the defence has not been ready with its witnesses.

8. On February 25, 2023, the Defendant moved the court with the current application seeking to invoke the arbitral clause in the building contract agreement between the parties and have the court refer the matter to arbitration, as was the original intend of the parties, when they first contracted. The Defendant seeks to place reliance on clause 40 of the building works agreement. The Defendant, in seeking to place reliance on the said clause, accuses its previous counsel of negligence in their failure to move the court appropriately when the matter was filed. He urges this court to invoke the said arbitral clause and allow the matter to move to arbitration forthwith.

9. Order 46 Rules 1, 2 & 3 deals with a situation where the court mandated arbitration and provides how the same is to be conducted. The said order provides as follows;1. Parties to a suit may apply for arbitration [Order 46, rule 1. ]Where in any suit all the parties interested who are not under disability agree that any matter in difference between them in such suit shall be referred to arbitration, they may, at any time before judgment is pronounced, apply to the court for an order of reference.2. Appointment of arbitrator [Order 46, Rule 2. ]The arbitrator shall be appointed in such manner as may be agreed upon between the parties. 3. Form of order [Order 46, rule 3. ]1. The court shall, by order, refer to the arbitrator the matter in difference which he is required to determine, and shall fix such time as it thinks reasonable for the making of the award, and shall specify such time in the order.2. Where a matter is referred to arbitration, the court shall not, save in the manner and to the extent provided in this Order, deal with such matter in the suit.”

10. While section 6 of the Arbitration Act provides as follows:-'Section 6. Stay of legal proceedings1. 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 unless it find-a.that the arbitration agreement is null and void, inoperative or incapable of being performed; orb.that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.2. Proceedings before the court shall not be continued after an application under subsection (1) has been made and the matter remains undetermined.3. If the court declines to stay legal proceedings, any provision of the arbitration agreement to the effect that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.'

11. The application before this court has been brought under the two provisions of the law, that is, Order 46 Rule 1, 2 and 3 and Section 6 of the Arbitration Act. As argued by the Plaintiff in its submissions, these two provisions of the law are not interchangeable. They relate to two separate processes. Order 46 of the Civil Procedure Rules relates to a court mandated arbitration where the court determines the issues and proceeds to appoint an arbitrator with a clear mandate from the court on what the arbitrator is to deal with. The court in such an instance determines the period and monitors the process. This is not to be confused with section 6 of the Arbitration Act where the court is called upon to stay any proceedings before it and allow parties to submit the dispute between them to an arbitrator or arbitrators for determination and agree to be bound by the outcome. Be that as it may, bringing the application as it did under the two provisions is not a bar to this court to consider the issues before it.

12. The Defendant in moving the court to refer the matter to arbitration seeks to place reliance on clause 40 of the building works contract entered by and between the parties on May 10, 2010. The court notes that the dispute herein arose on or around 2015 when the Plaintiff filed the current suit. The court also notes that this matter is part heard and that the Plaintiff has called a total of 5 witnesses and closed its case in 2020. The court further notes that on several occasions the matter was listed down for hearing but for one reason or the other the Defendant has not been ready to put forward its defence. It is not lost upon the court that when this application was filed February 25, 2023, this matter was set down for defence hearing on March 1, 2023.

13. Article 159(2)(c) of the Constitution urges the court to embrace alternative dispute resolution. The said Article 159(2)(c) provides as follows:-Art 159 (2) -In exercising judicial authority, the courts and tribunals shall be guided by the following principles—(c)alternative forms of dispute resolution including reconciliation, mediation, arbitration and traditional dispute resolution mechanisms shall be promoted, subject to clause (3).'

14. This constitutional provision makes available other modes of resolving disputes available to the parties other than litigation before the court. In the matter before this court, the court has noted that at all material times during the pendency of this matter the Defendant had legal counsel representing it. The court has also noted that the Defendant participated in the hearing and prosecution of the Plaintiff’s case including the cross examination of its witnesses up to the close of the Plaintiff’s case. It is now three years since the Plaintiff closed its case and the Defendant was availed opportunity to present its defence. Instead, the defence has tried by all means available to avoid doing so including filing the current case. Article 165 of the Constitution clothes the High Court with original and inherent jurisdiction to hear and determine all civil and criminal matters filed before it save for those that fall under the specialised courts created under Article 162 of theConstitution. There is therefore nothing to stop the court from continuing to hear this matter and make a determination appropriately, as it has already commenced.

15. In conclusion and having considered the facts of this case and taking into consideration that this case has been pending before the courts for close to 8 years, and that the Plaintiff has closed its case, I note that despite the existence of an arbitral clause in the disputed contract that this court is clothed with the necessary power to hear and determine this case as filed. The court finds and holds that the application before it is but another opportunity by the Defendant not to present its defence and delay the case further and is therefore an abuse of the court process. The said application is therefore struck out in its entirety with costs to the Plaintiff. The Defendant is directed to prepare and defend the suit since the Plaintiff already closed its case in 2020.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 9TH DAY OF OCTOBER 2023………………………………J. W. W. MONG’AREJUDGEIn the Presence of:-1. Mr. Bundotich for the Plaintiff/Respondent.2. Mr. Osiemo for the Defendant/Applicant.3. Amos - Court Assistant