[2022] KEHC 236 (KLR)

Technoservice Limited v Nokia Corporation & 5 others (Civil Case E093 of 2020) [2022] KEHC 236 (KLR) (Commercial and Tax) (25 March 2022) (Ruling)

Neutral citation: [2022] KEHC 236 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Case E093 of 2020

EC Mwita, J

March 25, 2022

Between

Technoservice Limited

Applicant

and

Nokia Corporation

1st Respondent

Risto Silasmaal

2nd Respondent

Stephen Elop

3rd Respondent

Nokia International Oy

4th Respondent

Bruce Howe

5th Respondent

Gerard Brandjes

6th Respondent

Ruling

ARGUMENTS 1. IntroductionThe applicant, Techno service Limited, instituted a suit against the 6 respondents, claiming that there was a business relationship between the parties. The applicant claimed that the respondents not only assigned but also unilaterally transferred its business to another entity without its consent in breach of the business relationship between them. The applicant filed this suit claiming among other reliefs, declaration of existence of a quasi-contract between the parties as well as general damages for breach of contract.

2. The 6 respondents took out a chamber summons seeking to have the matter referred to arbitration. That application was heard by Mativo J, and in a ruling delivered on 27th August 2021, the application was allowed and the matter was referred to arbitration.Application

3. In a notice of motion dated 6th September 2021, brought under Article 159(2)(d) of the Constitution, sections 1A, 1B and 3A of the Civil Procedure Act and Orders 42 rule 2 and 43 rule 1 (3) of the Civil Procedure Rules, the applicant sought three main order; leave to appeal against the ruling dated 27th August 2021 referring the matter to arbitration; that the Notice of Appeal attached to the application be deemed to have been filed and served and suspension of the operation of the impugned ruling, pending the hearing and determination of the intended appeal.

4. The application was supported by the grounds on the face of the motion; affidavit sworn by Bulent Gulbahar on 6th September 2021 and written submissions dated 30th October 2021. The applicant asserted that it was aggrieved with the impugned ruling and wanted to appeal. According to the applicant, it had no opportunity to apply for leave to appeal because the ruling was sent to the parties by email.

5. The applicant asserted that the arbitration clauses relied on were unconstitutional, an issue that needed to be determined fully. It further argued that an application for leave to appeal is permitted under Order 43 rule 1 (3) as read with section 75 of the Civil Procedure Rules and that leave could not have been sought orally at the time the ruling was delivered because parties did not appear to take the ruling.

6. The applicant relied on Nyutu Agrovet Limited v Airtel Networks Limited[2015] eKLR that it is good practice to allow a party to appeal however good or bad his journey to the Court of Appeal may look as it is that court that will determine whether the journey was a false start or not.

7. It is the applicant’s case that the grounds upon which the intended appeal is based that the arbitration clauses were unconstitutional are arguable. It relied on Dennis Mogambi Mong’are v Attorney General & 3 others[2012] eKLR for the proposition that an arguable appeal is not one that must necessarily succeed.

8. The applicant further relied on John Amalemba Kiroli & 2 others v Joseph Chibeiya Makamu[2021] to argue that the discretion granted by rule 4 of the Court of Appeal Rules for extension of time for lodging appeal is unfettered and is only subject to being granted on terms as the court may think just.

9. On whether the court should suspend operations of the impugned ruling and stay arbitral proceedings, the applicant argued in the affirmative. It asserted that if the arbitral proceedings are not stayed, the respondents will proceed to fix the dispute for arbitration to its detriment. Reliance was placed on Consolidated Marine v Nampija & another (Civil Application No. 93 of 1989-NBI), for the argument that the purpose of an application for stay of execution pending appeal is to preserve the subject matter in dispute.

10. The applicant’s view was that since the intended appeal has a heavy bearing on the manner in which the dispute is to be canvased, failure to grant stay will have the potential of rendering the intended appeal nugatory. It relied on Butt v Rent Restriction Tribunal[1982] KLR 417 on the exercise of discretion of the court to grant stay.

11. The court was urged to grant leave to appeal and suspend the time within which to refer the matter to arbitration since this would be beneficial to both parties. According to the applicant, if the intended appeal was to fail in the Court of Appeal, parties would still have the liberty to proceed to arbitration thereby allowing them access to justice. Reliance was placed on section 95 of the Civil Procedure Act, that the court has discretion enlarge time even though the period originally fixed or granted has expired.

12. The applicant argued that neither party will suffer any prejudice if the application was granted. The intended appeal has the potential of determining whether the dispute should be heard through the ordinary process, since the real issues in the dispute have not been subjected to active litigation.Response

13. The respondents filed grounds of opposition dated15th September 2021 and written submissions dated 17th November 2021. They argued, first; that this court has no jurisdiction to issue the orders sought and relied on Owners of Motor Vessel “Lillian S” v Caltex Oil (Kenya) Limited [1989]1 KLR that jurisdiction is everything and without it the court cannot make one more step in the matter.

14. The respondents argued that granting leave to appeal and or suspending operations of the ruling are not pegged on any law. In any event, they asserted, this court’s jurisdiction to determine the application is limited by section 10 of the Arbitration Act, from interfering with matters governed by the Act unless expressly provided for.

15. The respondents further asserted that the Court of Appeal settled the issue of the sui generis nature of arbitration proceedings under the Arbitration Act and that the Civil Procedure Act and rules do not apply to these proceedings. They cited Anne Mumbi Hinga v Victoria Njoki Gathara [2009] eKLR for the argument that all other provisions including the Civil Procedure rules do not apply to arbitration proceedings because section 10 of the Arbitration Act makes the Act a complete code. They maintained that the application having been brought under the Civil Procedure Act and rules, it cannot be allowed.

16. According to the respondents, section 6(1) of the Arbitration Act is the substantive provision governing stay of legal proceedings and does not provide for stay of execution after granting leave to appeal. They relied on Kenya Shell Ltd v Kobil Petrolleum Ltd(Civil Application No. No. NAI 57 of 2006); [2006] eKLR, for the proposition that arbitration proceedings are sui generis with its own law and therefore Civil Procedure Rules do not apply to such proceedings. They urged that the application be dismissed with costs.Determination

17. I have considered the application, the response and decisions relied on by parties. The applicant sought leave to appeal and stay these proceedings pending determination of the intended appeal. The respondents opposed the application, arguing that there were no good grounds for allowing it. They also argued that the application having been brought under the Civil Procedure Rules, it could not be granted since those provisions do not apply to arbitration proceedings.Leave to appeal

18. Whether or not the court would grant leave to appeal is a matter for the discretion of the court. Like in all discretions exercisable by courts, however, it has to be judicially considered (Kenya Shell Ltd v Kobil Petrolleum Ltd(supra).

19. In Machira t/a Machira & Company Advocates v Mwangi & Another. [2002] e KLR the court stated as follows:The Court will only refuse leave if satisfied that the applicant has no realistic prospects of succeeding on the appeal. The use of the word “realistic” makes it clear that fanciful prospect or an unrealistic argument is not sufficient. When leave is refused, the Court gives short reasons which are primarily intended to inform the applicant why leave is refused. The Court can grant the application even if it is not so satisfied. There can be many reasons for granting leave even if the Court is not satisfied that the appeal has no prospects of success. For example, the issue may be one which the Court considers should in the public interest be examined by this Court or, to be more specific, this Court may take the view that the case raises a novel point or an issue where the law requires clarifying. There must, however, almost always be a ground of appeal which merits serious judicial consideration.

20. In Mohamed Yakub & Anor t/a Yasser Butchery vs. Mr. Badur Nasa & 2 others(Civil Appl. NAI. 285/99 (ur), the court observed that the approach will however naturally differ, depending on the category and subject matter of the decision and the reason for seeking leave to appeal.

21. The applicant stated that the ruling was sent to parties through email and for that reason, there was no opportunity to apply for leave. That position has not been disputed by the respondents. The respondents’ case is that the court cannot interfere with arbitral proceedings given that they are governed by an independent legal regime from the Civil Procedure Act and Rules.

22. There is no doubt that the Court, (Mativo J), allowed the matter to be referred to arbitration. That was after he was satisfied that there was an arbitration clause that the matter was subject to arbitral proceedings. The court, therefore, ruled in favour of the matter going to arbitration because there was an arbitration clause that had been voluntarily agreed upon by all parties. The essence of an arbitration clause is the realization that arbitration is a speedy dispute resolution mechanism and parties freely opt out of the ordinary the court process.

23. The applicant’s ground for seeking leave to appeal is that the arbitration clause was unconstitutional, an argument the Judge must have considered and rejected. The applicant will have an opportunity to challenge any award given that the law gives that opportunity and the grounds for doing so.

24. In (Kenya Shell Ltd v Kobil Petrolleum Ltd (supra), while declining to grant leave to appeal, the court of Appeal stated:Arbitration is one of several dispute resolution methods that parties may choose to adopt outside the courts in this country. The parties may either opt for it in the course of litigation under Order XLV of the Civil Procedure Rules or provide for it in contractual obligations in which event the Arbitration Act, Act no. 4 of 1995 (the “Act”) would apply and the courts take a back seat. In the matter before us, the parties had an arbitration clause and therefore the Act applies. The Act, which came into operation on 2nd January, 1996, and the rules thereunder, repealed and replaced Chapter 49 Laws of Kenya, and the rules thereunder, which had governed arbitration matters since 1968. A comparison of the two pieces of legislation underscores an important message introduced by the latter Act: the finality of disputes and a severe limitation of access to the courts. Sections 6, 10, 12, 15, 17, 18, 28, 35 and 39 of the Act are particularly relevant in that regard. The message, we think, is a pointer to the public policy the country takes at this stage in its development.

25. In CWL Commercial (Edm) Inc. v Dynafour Real Estate, Partnership 2013 ABQB 545 (CanLII) it was held that as a matter of policy and law, the role of the court in relation to arbitration has been one of non-intervention. The objective of arbitration agreement and jurisprudence interpreting it is to promote adherence to those agreements.

26. In the circumstances, granting leave to appeal will delay the resolution of the dispute which parties had committed to avoid when they opted for arbitration.

27. The respondents also argued that the application was brought under the Civil Procedure Act and Rules which do not apply to arbitration proceedings. The applicant did not address this issue at all. I have perused the application and clearly it is brought under sections 1A, 1B and 3A Civil Procedure Act and Orders 42 and 43 of the Civil Procedure Act and Rules which, as correctly argued by the respondents, do not apply to arbitration proceedings which are sui generis.

28. As the Court of Appeal stated in Anne Mumbi Hinga v Victoria Njoki Gathara(supra);A careful look at all the provisions cited in the heading in the application and invoked by the appellant in the superior court clearly shows that, all the provisions including the Civil Procedure Act and rules do not apply to arbitral proceedings because Section 10 of the Arbitration Act makes the Arbitration Act a complete code and rule 11 of the Arbitration Rules cannot override Section 10 of the Arbitration Act.

29. Although the applicant cited Article 159(2)(d) of the constitution that courts should determine disputes without undue regard to technicalities of procedure, the Article cannot be read to be a relief or escape route for parties who do not want to comply with procedure. For instance, it cannot be read as nullifying the import of the Arbitration Act. It must also be noted that the same Article emphasizes on alternative dispute resolution mechanisms, including arbitration.

30. Flowing from the analysis above, the application before this court cannot be granted. It was not only based on wrong law but is also without merit.

31. Having declined leave, stay of proceedings or suspension of the operation of the impugned ruling does not arise.

32. In the end, the application dated 6th September 2021 is declined and dismissed with costs

DATED SIGNED AND DELIVERED AT NAIROBI THIS 25THDAY OF MARCH 20222EC MWITAJUDGE