https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/11127

 REPUBLIC OF KENYA IN THE HIGH COURT OF KENYA AT KIAMBU COUNTY COURT NAME: THIKA HIGH COURT CASE NUMBER: HCCA/E316/2025 THIKA WATER AND SEWERAGE COMPANY LTD VS OCTAGON BUILDERS AND GENERAL SUPPLIERS LTD AND SMEP MICROFINANCE BANK LIMITED JUDGMENT ***(Arising from the Ruling of the Honorable Magistrate M.L Nabibya, SPM delivered on 19th November 2025 in Thika Chief Magistrate’s Court Civil Suit No. E280 of 2025)*** # INTRODUCTION * 1. This Appeal arises from the Ruling of the Honorable Magistrate M.L Nabibya, SPM delivered on 19th November 2025 in Thika Chief Magistrates Court Civil Suit No. E280 of 2025. # BRIEF FACTS OF THE SUIT 1. The Plaintiff instituted this suit vide a Plaint together with an Application under Certificate of Urgency dated 8th May, 2025. 2. The Plaintiff's case was that it entered into a contract with the Defendant for the rehabilitation of Blue Nile and Kisii Collapsing Trunk Sewers under Tender No. THIWASCO/032/RBKCS/2023-2024 and Contract No. THIWASCO/CNTRCT/011/2023-2024, which was executed by both parties on 13th March, 2024. Pursuant to the contract requirements, the Plaintiff obtained a bank guarantee from the Interested Party (2nd Respondent herein) in the sum of Kshs. 2,876,665/=. 1. Upon execution of the contract and mobilization to the site, the Plaintiff commenced the works. It was a term of the contract that the Defendant would make periodic payments. The Plaintiff subsequently demanded payment of Kshs. 4,041,650/=, which the Defendant allegedly failed to settle, prompting the Plaintiff to halt the works. Thereafter, the Defendant called up the bank guarantee from the Interested Party and terminated the contract when the project was approximately 37% complete. 2. Although the Plaintiff sought various substantive reliefs in the Plaint, this appeal concerns the interlocutory application filed contemporaneously with the suit rather than the main claim. 3. Following the filing of the Application, the trial court issued an Order dated 12th May, 2025, certifying the matter as urgent and granting a temporary injunction restraining the Interested Party (2nd Respondent) from making any payment to the Defendant (Appellant herein) pending the inter parties hearing scheduled for 28th May, 2025. 4. Subsequently, the Defendant (Appellant herein) filed an Application dated 24th June, 2025 seeking orders that the suit be referred to arbitration, that all proceedings therein be stayed pending arbitration of the dispute, and that the costs of the Application be awarded to the Applicant. 5. The trial court delivered its ruling in respect of the two Applications. The first Application was that of the Plaintiff (1st Respondent) dated 8th May, 2025. While some of the prayers sought therein had been spent, the remaining prayers were: *“That this Honorable court be pleased to issue a temporary injunction restraining the interested party from making any* *payments to the defendant herein pursuant to demand letter dated 20th March, 2025 or in any way complying with the said letter pending the hearing and determination of this suit, That this court be pleased to issue a temporary injunction restraining the defendant from advertising for tenders for the contract THIWASCO/CNTRCT/011/2023-2024 dated 28th March pending the hearing and determination of the suit and That the costs of this Application be provided for.”* 1. The second Application, filed by the Appellant herein, was dated 24th June, 2025. In the said Application, the Appellant sought the following orders: *“that the court be pleased to refer the parties hereto to arbitration, that this court be pleased to stay all proceedings in this suit pending the arbitration of the dispute between the parties, that this court be pleased to issue a temporary injunction restraining the interested party from making any payments to the defendant herein pursuant to demand letter dated 20th March, 2025 or in any way complying with the said letter and determination of this suit and that the defendant be awarded costs.”* 2. On the issue of arbitration, the learned magistrate relied on the case of *Mwakisha & 2 Others vs. Maghanga & another (2023) eKLR* and held that since the Interested Party (2nd Respondent) was not a party to the arbitration agreement, it could not be subjected to arbitration proceedings. Consequently, the court found the Defendant’s Application dated 24th June, 2025 to be unmerited. 3. In determining the Plaintiff’s (1st Respondent’s) Application, the trial court relied on the provisions of Order 40 of the Civil Procedure Rules (Revised 2020) and the principles established in *Giella vs. Cassman Brown (1973) EA 358*. 4. The trial court found that the Plaintiff had established a prima facie case, noting that a contract existed between the parties and that the Plaintiff had demonstrated interference with its rights by the Defendant. The court further held that the Plaintiff would suffer irreparable harm if the injunction was not granted, as it would be deprived of its contractual rights, and that the balance of convenience tilted in favour of the Plaintiff, having established a prima facie case. 5. Consequently, the trial court allowed the Plaintiff’s Application dated 8th May, 2025, granted the orders sought therein, and directed that costs be in the cause. 6. Being dissatisfied with the ruling of the Magistrate’s Court, the Defendant (Appellant herein) filed a Memorandum of Appeal on the following grounds: 1. *That learned magistrate erred in law and in fact in failing to consider and/or disregarding the entirety of the evidence tendered by the Appellant thereby arriving at an erroneous conclusion, resulting in an injunctive order against a non-existent subject matter.* 2. *That the learned trial magistrate erred in law by misapprehending, misapplying and/or disregarding principles of law to wit principles of interlocutory injunction with regards to irreparable harm thereby arriving at an erroneous conclusion.* 3. *That the learned magistrate erred in law by misapprehending Section 6(1) of the Arbitration Act and the ratio decidendi in Eunice Soko Mlagui Suresh Parmar & 4 Others (2017) KECA 736 (KLR)* 4. *That the learned trial magistrate erred in law in exercising her discretion and in a manner that was not judicious leading to the dismissal of the Appellants Application dated 24th June, 2025. REASONS WHEREFORE, it is proposed to ask this Honourable court for orders that; This Appeal be allowed, the Ruling and Decree of the Honourable M.L. Nabiya issued on the 19th November 2025 in THIKA MCCC E280 of 2025 be set aside in its entirety and in place therefore substituted with an order staying proceedings in the subordinate court and that this Honourable court do issue an order referring the dispute to arbitration pursuant to section 6(1) of the Arbitration Act and Cause 24.1.1 of the Agreement between the Appellant and the 1st Respondent.* 7. In the premises, it is imperative for this court to look at the submissions before it, before bringing out the issues to be determined. # SUBMISSION BY PARTIES **Appellant’s Submissions** 1. The Appellant's first ground of appeal was that the learned magistrate erred in law and fact by granting an injunctive order over a non-existent subject matter. While acknowledging the appellate court's duty to re-evaluate the evidence afresh as set out in *Selle & Another v Associated Motor Boat Company Ltd & Others (1968) EA*, the Appellant called upon this court to take keen interest, that the trial court failed to consider evidence contained in the Replying Affidavit of Dr. Moses Kinya sworn on 19th June, 2025, which demonstrated that the 2nd Respondent had already paid the guaranteed sum to the Appellant. This position was further confirmed by the 2nd Respondent through the Replying Affidavit of Kepher Otieno Oyoo. The Appellant therefore argued that the court improperly granted an injunction restraining an act that had already been completed, contrary to the principles stated in *Moses Saul Khamati v Sebio Juma Kweyu & Another*. 2. On the second issue, the Appellant contended that the learned magistrate misapprehended the principle of irreparable harm as established in *Giella v Cassman Brown*. Although the trial court relied on *Nguruman Limited v Bonde Nielsen & 2 Others* and found that the 1st Respondent would suffer irreparable harm by being deprived of its contractual rights, the Appellant argued that the claim before the court concerned quantifiable monetary sums, namely unpaid interim certificates amounting to Kshs. 4,041,650/= and a bank guarantee of Kshs. 2,876,665/=. 3. According to the Appellant, these were liquidated claims capable of compensation through damages, and no evidence was tendered to demonstrate that the Appellant was insolvent or incapable of satisfying any award. Consequently, the trial court erred in holding that deprivation of contractual rights constituted irreparable harm. The Appellant urged this court to interfere with the exercise of discretion in accordance with *Khambi & Another v Mahithi & Another (1968) EA 70*. 4. On the issue of arbitration, the Appellant submitted that the trial court misdirected itself in finding that the filing of a Replying Affidavit dated 19th June, 2025 amounted to an acknowledgement of the claim under Section 6(1) of the Arbitration Act, thereby barring the Appellant from seeking a stay of proceedings. The Appellant argued that the Replying Affidavit was filed solely in opposition to the interlocutory injunction application and not as a response to the substantive claim. At the time of filing the affidavit, no defence had been filed, the defence having been filed later on 24th June, 2025 together with the application seeking referral of the dispute to arbitration. The Appellant therefore maintained that the affidavit did not constitute an acknowledgement of the claim within the meaning of Section 6(1) of the Arbitration Act. 1. The Appellant further challenged the trial court's finding that the presence of the Interested Party barred referral of the dispute to arbitration. It was submitted that the Interested Party was merely a stakeholder holding the bank guarantee and was not being compelled to participate in arbitration. The Appellant argued that the existence of a non-signatory stakeholder does not extinguish the contracting parties' right to arbitrate and that, where both arbitrable and non-arbitrable issues arise, the court has discretion to stay the proceedings pending arbitration or sever the claims accordingly. The Appellant therefore urged the court to allow the appeal and award it the costs of both the appeal and the proceedings before the lower court. **1st Respondent’s Submissions** 1. The 1st Respondent's first issue was whether the trial magistrate misapprehended the law governing temporary injunctions. The 1st Respondent submitted that the Appellant had challenged the ruling on the basis that the trial court misapplied the principles relating to interlocutory injunctions, particularly the requirement of irreparable harm. However, the trial court ultimately found merit in the Plaintiff's Notice of Motion dated 8th May, 2025 and allowed it in terms of prayers (iii) and (v). 2. The 1st Respondent submitted that prayer (iii), which restrained the Interested Party (2nd Respondent) from making payments to the Appellant, was directed specifically against the Interested Party and not the Appellant. Consequently, the party directly affected by the order was the Interested Party, which has not appealed against the ruling. 3. The 1st Respondent further argued that, contrary to the Appellant's contention, the orders granted were not limited to prayer (iii), which is alleged to have been overtaken by events. The ruling also granted prayer (v), which restrained the re-advertisement and termination of the tender. Further, the trial court found that the Plaintiff had established a prima facie case with a likelihood of success and stood to suffer irreparable harm. The 1st Respondent contended that, having failed to adequately address these findings, the Appellant should be deemed to have abandoned Ground No. 2 of the Memorandum of Appeal. 4. On the second issue, namely whether the proceedings should be stayed and the dispute referred to arbitration, the 1st Respondent relied on *Mwakisha & 2 Others v Maghanga & Another* and submitted that the Appellant had already entered appearance and participated in the proceedings by filing a Replying Affidavit in response to the Plaintiff's Application dated 8th May, 2025 before seeking referral of the dispute to arbitration. The 1st Respondent further supported the trial court's finding that the presence of the 2nd Respondent, who was not a party to the arbitration agreement, rendered the matter unsuitable for arbitration. Reliance was also placed on *Sagar Builders Limited v Speedway Investment Limited (2012) KEHC 5353 (KLR)* to demonstrate that the Appellant's conduct amounted to participation in the proceedings and was therefore inconsistent with an intention to pursue arbitration. 5. Although the 2nd Respondent, who was the Interested Party in the proceedings, had not filed submissions by the time of preparation of this judgment, the court shall nonetheless proceed to determine the appeal on the basis of the material and submissions on record. # ISSUES FOR DETERMINATION 1. Having considered the Memorandum of Appeal, the Record of Appeal, the rival submissions by the parties, and the applicable law, the issues that arise for determination are: 2. Whether the learned trial magistrate erred in granting the temporary injunction sought by the 1st Respondent. 3. Whether the learned trial magistrate erred in declining to stay the proceedings and refer the dispute to arbitration pursuant to Section 6(1) of the Arbitration Act. 4. Whether this court should interfere with the exercise of discretion by the trial court. # ANALYSIS OF THE ISSUES FOR DETERMINATION ## Whether the learned trial magistrate erred in granting the temporary injunction sought by the 1st Respondent 1. The principles governing the grant of interlocutory injunctions are settled and were laid down in ***Giella v Cassman Brown & Co. Ltd [1973] EA 358***. An applicant must establish; a prima facie case with a probability of success, That he stands to suffer irreparable injury which cannot adequately be compensated by an award of damages, and, the court should determine the matter on a balance of convenience. 2. The Court of Appeal in ***Nguruman Limited v Jan Bonde Nielsen & 2 Others (2014) eKLR*** reaffirmed that the three conditions are sequential and not separate hurdles to be considered in isolation. 3. From the material placed before the trial court, there is no dispute that the parties entered into a valid contract for the rehabilitation of Blue Nile and Kisii Collapsing Trunk Sewers. There is also evidence that the 1st Respondent had mobilized to site, undertaken works and completed approximately 37% of the project. The 1st Respondent further alleged that despite raising payment claims amounting to Kshs. 4,041,650/=, the Appellant failed to honour its contractual obligations, forcing it to halt the works. Notwithstanding the alleged non-payment, the Appellant proceeded to invoke the performance guarantee and terminate the contract. 4. At this interlocutory stage, the court is not called upon to make definitive findings on the merits of the parties' competing claims. The court is only required to determine whether the Applicant demonstrated a right that had apparently been infringed and which called for protection pending the hearing of the suit. This position was explained in ***Mrao Ltd v First American Bank of Kenya Ltd & 2 Others (2003)eKLR***, where a prima facie case was defined as one which, on the material presented, shows an apparent infringement of a right requiring rebuttal by the opposite party. 1. This court is satisfied that the trial magistrate correctly found that the 1st Respondent had established a prima facie case. The evidence before the trial court disclosed a serious dispute regarding the performance of the contract, payment of interim certificates, invocation of the bank guarantee and termination of the contract. These were not frivolous complaints but issues deserving full interrogation at trial. 2. The Appellant argued that the injunction was granted over a non-existent subject matter because payment under the guarantee had already been made. However, the impugned ruling was not confined to restraining payment under the guarantee alone. The trial court also granted an order restraining the re-advertisement of the tender and the consequential implementation of the termination. The substratum of the dispute therefore remained alive. 3. Further, equity demands that a party seeking equitable relief must come to court with clean hands. Although this court is not determining the substantive dispute, the record reveals allegations that the Appellant failed to honour its payment obligations while at the same time invoking the performance guarantee and terminating the contract after the 1st Respondent had expended its own resources and completed approximately 37% of the works. These circumstances justified preservation of the status quo pending the hearing of the suit. 4. The ourt therefore finds no basis for interfering with the trial court's finding that the 1st Respondent had established a prima facie case with a probability of success. ## Whether the learned trial magistrate erred in declining to stay proceedings and refer the dispute to arbitration 1. Section 6(1) of the Arbitration Act provides that a court shall stay proceedings and refer parties to arbitration where there exists a valid arbitration agreement, provided the application is made not later than the time when the applicant enters appearance or otherwise acknowledges the claim. 2. The Appellant submitted that the learned magistrate misdirected herself by treating the Replying Affidavit filed on 19th June, 2025 as an acknowledgement of the claim. This court agrees that the filing of a Replying Affidavit in response to an interlocutory application does not, strictly speaking, amount to entering appearance as contemplated under Section 6(1) of the Arbitration Act. 3. However, the matter does not end there. 4. The court must consider the totality of the Appellant's conduct. The record shows that the Appellant actively participated in the proceedings by responding to the interlocutory application and inviting the court to determine contested issues. Such conduct demonstrated a clear recognition of and participation in the proceedings before subsequently seeking refuge under the arbitration clause. 5. In ***Sagar Builders Limited v Speedway Investments Limited* (2012) eKLR**, the court held that a party who takes substantive steps in proceedings may be deemed to have waived its right to insist on arbitration. A party must invoke the arbitration clause at the earliest opportunity. 1. Moreover, the suit before the trial court involved the 2nd Respondent, who was not a party to the arbitration agreement. While the mere presence of a non-signatory does not automatically defeat an arbitration clause, the trial court was entitled to consider whether the dispute before it could be effectively and completely resolved through arbitration without affecting the rights and obligations of a non-party. 2. In the circumstances of this case, this court cannot fault the trial magistrate for declining to stay the proceedings and refer the dispute to arbitration. ## Whether this court should interfere with the exercise of discretion by the trial court 1. An appellate court will not lightly interfere with the exercise of judicial discretion. In ***Mbogo & Another v Shah* [1968] EA 93**, the court held that an appellate court may only interfere where the lower court misdirected itself in law, considered irrelevant matters, failed to consider relevant matters, or where its decision is plainly wrong. 1. Having reviewed the record, this court is satisfied that the trial magistrate properly considered the pleadings, affidavits, submissions and applicable law before arriving at the impugned decision. Although this court has found that the learned magistrate may have misapprehended the strict meaning of "entering appearance" under Section 6(1) of the Arbitration Act, that error did not occasion a miscarriage of justice nor did it affect the ultimate conclusion reached by the court. 2. The overall decision to preserve the subject matter through injunctive relief and decline referral of the dispute to arbitration was sound, lawful and supported by the material placed before the court. # DISPOSITION 1. In the result, this court finds that the appeal lacks merit and is hereby dismissed in its entirety. Accordingly; 1. The Ruling and Orders of Hon. M.L. Nabibya, SPM delivered on 19th November, 2025 in Thika CMCC No. E280 of 2025 are hereby upheld. 2. The Temporary Injunction granted by the trial court shall remain in force pending the hearing and determination of the suit before the subordinate court or until further orders of that court. 3. The Appellant's Application seeking stay of proceedings and referral of the dispute to arbitration was properly dismissed and shall remain dismissed. 1. The matter shall be remitted back to the trial court for hearing and determination on its merits. 2. Given the contractual relationship between the parties and in order to foster expeditious determination of the substantive dispute, each party shall bear its own costs of this appeal. It is so ordered. SIGNED BY/FOR: **□ TH E JUDICIAR Y O F KENY A ★** **HON. JUSTICE ABDI M. HASSAN** Thika High Court High Court Div Date: 2026-07-22 13:27:54