[2024] KEHC 2186 (KLR)

University of Nairobi v Laton Engineering Limited & another (Commercial Miscellaneous Application E688 of 2022) [2024] KEHC 2186 (KLR) (Commercial and Tax) (4 March 2024) (Ruling)

Neutral citation: [2024] KEHC 2186 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Commercial Miscellaneous Application E688 of 2022

AA Visram, J

March 4, 2024

Between

University Of Nairobi

Applicant

and

Laton Engineering Limited

1st Respondent

Lucas AN Ochieng’, The Sole Arbitrator

2nd Respondent

Ruling

1. I have considered the Originating Summons Application dated 23rd September, 2022, together with the supporting affidavit sworn on even date; the replying affidavit sworn in opposition to the same on 21st November, 2022; and the grounds of opposition dated 18th September, 2022, together with the rival submissions made by the parties and applicable law.

2. The Applicant is seeking a stay of arbitral proceedings pending hearing and determination of the present application and is further challenging the arbitrator’s jurisdiction to hear the dispute pursuant to section 17 of the Arbitration Act.

3. In support of the application, the Applicant submitted that the arbitrator had no jurisdiction to hear the present dispute between the parties. Counsel argued that jurisdiction flows from the arbitration agreement and that the same had not been complied with.

4. Counsel contended that by way of his ruling dated 26th August, 2022, the arbitrator, on one hand, ruled that he had no jurisdiction, and on the other hand, still went on to assume jurisdiction rather than downing his tools. His actions were accordingly contrary to law.

5. Counsel submitted that the tribunal had erred by finding that the Applicant’s action of filing pleadings before it amounted to conferring the tribunal with jurisdiction. The Applicant relied on the authority of Peter Ouma Onyango v Mats Karlesson 32021 eKLR in support of her argument that jurisdiction is derived from the agreement of the parties, and not based on filing pleadings before the tribunal.

6. In opposition to the application, 1st Respondent’s argument in summary was to the effect that this court has no jurisdiction to stay proceedings of the tribunal. In support of the above, Counsel relied on section 17(8) of the Act, which stipulates that proceedings before the tribunal may continue while the court deliberates on an application such as the present one.

7. In opposition to the Application, Counsel for the 2nd Respondent submitted that section 17(6) of the Act had not been complied with. Namely, the objection to the decision of the tribunal had not been raised within 30 days as required by the Act.

8. Counsel pointed out that the Applicant was only “partly objecting” to the tribunal’s jurisdiction. She submitted that this ‘part objection’ was both vague and inconsistent with the actions and conduct of the Applicant in the present matter.

9. Having considered the above, I note that the relevant law is found at section 17 of the Act. In particular, sections 17(2), (3) and (8) of the Act are instructive. The same provide as follows:17(2)A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence, however, a party is not precluded from raising such a plea because he has appointed, or participated in the appointment of, an arbitrator.…17(6)Where the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party aggrieved by such ruling may apply to the High Court, within 30 days after having received notice of that ruling, to decide the matter.…17(8)While an application under subsection (6) is pending before the High Court the parties may commence, continue and conclude arbitral proceedings, but no award in such proceedings shall take effect until the application is decided and such award shall be void if the application is successful.

10. Applying my mind to the above facts and applicable law, it is clear to me that there is indeed a valid arbitration clause in the contract between the parties. The agreement to arbitrate is found at Clause 41 of the contract and this is not in dispute.

11. It is therefore clear to me, that in the present matter, the jurisdiction of the tribunal has been, and is in fact, derived from the agreement of the parties to resolve their dispute by way of arbitration, and not by filing of pleadings as alleged.

12. Further, based on the record, I am satisfied that all the parties submitted to the jurisdiction of the arbitrator and in doing so, conferred the tribunal with jurisdiction. I say so because the proceedings began; the Respondent filed its defence and counterclaim; and at least three meetings took place between the parties and the tribunal. This is evidenced by the fact that there are three orders for directions by the tribunal on record.

13. More importantly, I am satisfied that both parties intended to commence the arbitral proceedings, and did so, by abiding to the requirements set out in Clause 41 of the contract (concerning the appointment of an arbitrator), which required a party to commence the proceedings by either concurrence in relation to the appointment of an arbitrator, or failing which, default provisions to apply. This procedure is set out in detail in clause 41. 1 of the contract.

14. It is evident that the parties tried, but could not agree on who to appoint as arbitrator, and accordingly invoked the default provisions set out in Clause 41. Accordingly, an arbitrator was eventually appointed by the Chairperson of the Chartered Institute of Arbitrators.

15. The sticking issue, is therefore, whether or not, the failure to comply with the notice provisions and the requirement to attempt amicable settlement prior to commencing arbitral proceedings deprived the tribunal of jurisdiction. Put another way, were the above requirements a condition precedent to the jurisdiction of the tribunal?

16. In relation to the above, the tribunal found that it still had jurisdiction in spite of the non -compliance because the parties had submitted to its jurisdiction. Based on facts before me, I tend to agree. The sequence of events shows that a defence and counterclaim was filed by the Applicant; preliminary meetings took off; orders for directions were issued; and to my mind, both of the parties triggered the arbitration clause when they attempted to appoint a tribunal.

17. Based on the above, I am satisfied that there is a valid arbitration clause, and that the parties intended to commence the arbitration pursuant to that clause. I find that the parties, by their own conduct, admitted to the jurisdiction of the tribunal, and waived the notice period requirements and the requirement to attempt to settle amicably when they commenced and participated in the arbitral proceedings.

18. Had the Applicant wished to challenge the jurisdiction of the tribunal, it ought to have done so at the outset and in accordance with the timelines set out in the Act. To my mind, the very purpose of section 17(2), which requires a challenge to be made prior to submission of defence, is precisely to avoid challenges to jurisdiction of the tribunal that may be foreseen from the outset. Such disruptions negate the very purpose of arbitration.

19. Finally, it is not lost on me that the Respondent submitted that the Applicant had not complied with the appropriate timelines set out in section 17(6) of the Act. The Applicant did not offer any explanation or rebut the said allegation. Accordingly, I am inclined to treat the same as accurate and uncontroverted. To my mind, such an oversight is fatal. Timelines under the Act are not ordinarily subject to review or extension, and must be read in light of Section 10 of the Act, which limits the actions and discretion of this Court.

20. Based on the reasons set out above, I find the Application is without merit. The same is dismissed with costs.

21. The file is accordingly marked as closed.

DATED AND DELIVERED VIRTUALLY VIA MICROSOFT TEAMS THIS 4TH DAY OF MARCH 2024ALEEM VISRAM, FCIArbJUDGEIn the presence of;…………………………………………………….…..…..….. For the Applicant………………………………………………………….… For the 1st Respondent…………………………………………………………... For the 2nd Respondent