[2024] KEHC 64 (KLR)

Upperhill Chambers Limited v Vio Tech Limited & another (Miscellaneous Application E162 of 2022) [2024] KEHC 64 (KLR) (Commercial and Tax) (11 January 2024) (Ruling)

Neutral citation: [2024] KEHC 64 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Miscellaneous Application E162 of 2022

JWW Mong'are, J

January 11, 2024

Between

Upperhill Chambers Limited

Applicant

and

Vio Tech Limited

1st Respondent

China Wu Yi Limited

2nd Respondent

Ruling

1The Applicant has by a Chamber Summons Application dated 28th February, 2022, under Section 36 of the Arbitration Act, 1995 as amended by the Arbitration (Amendment) Act, No. 11 of 2009, Rule 3 (2), 6 and 9 of the Arbitration Rules, 1997, moved this Honourable Court seeking the following Orders: -1. Spent2. Thatthe Arbitral Award dated 30th August 2021 in arbitral proceedings before Mr. John M. Ohaga S.C as a Sole Arbitrator between Vio Tech Limited -Vs- China Wu Yi Limited & Another be adopted as a Judgment of this Honourable Court.3. Thatthe Applicant be granted leave to enforce the Arbitral Award dated 30th August 2021 in the arbitral proceedings aforesaid as a Decree of this Honourable Court directing the 1st Respondent to pay to the Applicant Kshs.26,457,165. 00/- and interest thereon at the rate of 12% p. a from 30th August 2021 until payment in full.4. Thatthe costs of the application be provided.

2. The application is supported by the various grounds on its face and the Supporting Affidavit of Fredrick Ngatia SC, sworn on the same date. In a nutshell, the grounds are that the 1st Respondent instituted arbitral proceedings against the 2nd Respondent pursuant to Clause 31. 0 of the Sub-contract Agreement dated 22nd June 2017 between them. The 2nd Respondent filed a motion for Applicant to join the proceedings as a party, which was allowed. The Applicant and the 2nd Respondent filed their respective defences and counterclaims and the matter proceeded for hearing before John Ohaga SC, CIArb as a sole Arbitrator.

3. On 30th August 2021 the Arbitral Tribunal published an Award dismissing the 1st Respondent's claim and allowing the Applicant's counterclaim for Kshs.26,457,165. 90/- and the 2nd Respondent's counterclaim in part. The Applicant wishes to enforce the Arbitral Award since the 1st Respondent has not affected payment to the Applicant to date. The Applicant prays that award is recognised and adopted as an order of this Court and the Applicant be granted leave to enforce it as a decree of this Court.

4. 10th June 2022, the 1st Respondent filed grounds of opposition to the application urging the court to disallow the application on the following grounds:-1. The award dated the 30th August 2021 was a partial award not capable of enforcement in accordance with section 36 of the Arbitration Act.2. The application E162 of 2022 is thus vexatious, frivolous, and an abuse of court process.

5. Both parties filed their written submissions and appeared before the court to highlight the same. The 2nd Respondent did not file any grounds of opposition but instead during the hearing of the same urged the court to allow the application as filed.

6. In its submissions, the Applicant urged the Court to find that it has met the conditions for the recognition and enforcement of the award under Section 36 of the Arbitration Act in that it has availed the duly certified copies of the Arbitral Award and the Arbitration agreement as required by the law therein. The Applicant further submitted that the 1st Respondent has not challenged the enforcement of the Award in any way as envisioned by Section 37 of the Arbitration Act in that it has not filed an application to set aside the Award within the three-month statutory window given under Section 35 (3) of the Arbitration Act. The Applicant urged the Court to be persuaded by the holding in the case of Jimmy Mutuku Mwithi t/a Oasis Farm v Erick Omanga t/a Cidai Firm where the Court adopted an award that had not been challenged, set aside or appealed against. Similarly, in the case before this court, the Applicant argues that in the absence of an application seeking to set aside the Award, the only available remedy is to have the court recognise and adopt the Award as a decree of the court to enable its enforcement.

7. In opposition to the Application and vide written submissions dated 21st June 2022, the 1st Respondent argued that the instant application was premature since the arbitral award was partial in that it did not include an assessment of costs by the Tribunal. The 1st Respondent referred the court to Sub-clause VI of clause VIII of the award dated 30th August 2021 where the Tribunal provided that the costs of the reference, if not agreed within 30 days, shall be assessed by the Tribunal. Since the actual costs have not yet been determined, and there being no subsequent additional award made to clarify the position of the arbitrator on assessment of costs, the 1st Respondent argued that the Award sought to be enforced was interim and not final as envisioned by the Arbitration Act and therefore the Application before the court was premature and should be disallowed.

8. The 1st Respondent relied on the Court of Appeal decision in Kenfit Limited v Consolata Fathers (NRB CA Civil Appeal No. 229 of 2006) [2015] eKLR to the effect that the High Court can only recognise and enforce a final award by an arbitrator if the award does not reserve any matter for consideration by the arbitration or any other person. The 1st Respondent also relied on the Court of Appeal's decision in Ezra Odondi Opar v Insurance Company of East Africa Ltd [2020] eKLR to support the position that the instant application is premature since the issue of costs has not been concluded.

9. In response, through supplementary submissions dated 28th June 2022, the Applicant asserted that it was ordered to bear its own costs and that consequently the award of the counterclaim in its favour is not subject to any assessment of costs by the Arbitral Tribunal. The Applicant conceded that the 1st Respondent was held responsible for the 2nd Respondent’s costs and that the two parties were to agree on the costs failure to which the Arbitral Tribunal was to assess the costs. Be that as it may, the Applicant maintained that the adoption of the Award would not be affected by the fact that the Arbitral Tribunal has not assessed costs between the 1st & 2nd Respondents.

10. To support this position, the Applicant highlighted that under section 3 of the Act, an arbitral award includes an interim arbitral award. The Applicant also relied on the High Court decisions in Dinesh Construction Limited & another v Aircon Electra Services (Nairobi) Limited [2021] eKLR and Kimaryo v First Riverside Acres Limited & another (Miscellaneous Application E1283 of 2020) [2022] eKLR on the power of the court to recognise and enforce Arbitral Awards where the assessment of costs is reserved.

Analysis and Determination 11. I have carefully considered the application and the supporting affidavit and the written submissions by the Applicant, the rival arguments and submissions by the Respondent and the list of authorities upon which both parties placed reliance on. To my mind, the only issue for determination is “whether the Applicant has made out a case for the adoption and recognition of the arbitral award dated 30th August 2021 as an order of this Court”.

12. Section 36(1) of the Arbitration Act provides as follows: -“36. (1)A domestic arbitral award, shall be recognised as binding and, upon application in writing to the High Court, shall be enforced subject to this Section and Section 37. (2)……..(3)Unless the High Court otherwise orders, the party relying on an arbitral award or applying for its enforcement must furnish. (a) the original arbitral award or a duly certified copy of it; and (b) the original arbitration agreement or a duly certified copy of it.(4)….(5)….”

13. It is clear from the record that the Applicant has furnished certified copy of the award titled “Final Award [save as to assessment of costs]” dated 30th August 2021 and the Sub-contract Agreement dated 22nd June 2017 containing the arbitration agreement under clause 31. 0.

14. It is not in dispute that there is no application made by the 1st Respondent to set aside the award. However, the issue in contest is whether the adoption of the award can be hindered because of the issue of costs has not been concluded.

15. At para. 353, 354 and part VIII of the Award, the Tribunal observed: -“353. Taking all these matters into consideration, I therefore decide that the 1st Respondent is entitled to recover from the Claimant the costs of the arbitration limited to the areas in which it has had success. Even though the Tribunal recognizes that the 2nd Respondent is the principal in relation to both the Claimant and the 1st Respondent, it takes the view that the Claimant did not seek to advance any claim against the 2nd Respondent and accordingly the 2nd Respondent will bear its own costs of the reference.354. The amount of such costs, failing agreement by the parties, shall be determined by the Tribunal in terms of section 32B (1) of the Arbitration Act.VIII. AWardfor the reasons stated above, i now therefore award and direct that in full and final settlement of all claims in thisArbitration:I.The Claimant's claims against the 1st Respondent is denied.II.The 1st Respondent’s counter claim against the Claimant is allowed to the following extent:-i.Kshs.152,980. 00/- being the costs of handling and transportation of the units;ii.Kshs.1,026,000. 00/- being the costs of storage paid to Vas Auto Garage Limited until March 2020; the Claimant shall thereafter be responsible for all further costs of storage of all the units at Vas Auto Garage Limited;iii.The 2nd Respondent's counterclaim against the Claimant is allowed in the sum of Kshs.26,457,165. 90;iv.The amounts awarded to the Respondents shall be paid within forty-five (45) days from the date the Award is taken up by the Parties, failing which simple interest shall accrue thereon at the rate of 12% per annum until payment in full;v.The Claimant shall pay to the 1st Respondent's the costs of the reference but the costs of the Award shall be borne equally between the Parties.vi.The costs of the Reference, if not agreed within sixty (60) days, shall be assessed by the Tribunal."

16. From the above, it is clear that the Tribunal ordered the 1st Respondent to pay the 2nd Respondent’s costs of the reference and if not agreed within sixty (60) days, they would be assessed by the Tribunal. It is common ground that the actual costs have not been determined, and no subsequent additional award made to clarify the position of the arbitrator on the assessment of costs. It is also clear that the Tribunal ordered that each party would bear the costs of the award.

17. I have considered the Court of Appeal decision in Kenfit Limited v Consolata Fathers NRB CA Civil Appeal No. 229 of 2006 [2015] eKLR, cited in the 1st Respondent's submissions and note that the holding in that decision were that the award was a partial award and not a final award since the quantum of costs was left in abeyance for future determination and that it is only after the quantum of costs of arbitration has been determined that a final arbitral award could issue. The Court of Appeal also found that therefore the High Court was correct to find that the application for enforcement and recognition of the award was premature; and that subject to all relevant laws, the right of the appellant to make an application at a later date for the recognition and enforcement of the arbitral award remains unfettered. I note that the said case is distinguishable from the one before me in the sense that the Tribunal made a determination as to costs as between the Applicant and the Respondents and therefore there is no pending issue for determination between the parties.

18. Similarly in the case of Dinesh Construction Limited & another v Aircon Electra Services (Nairobi) Limited [2021] eKLR, cited in the Applicant’s submissions, Hon. Justice Majanja, faced with a similar issue, observed as follows:-“40. While I accept that I am bound by the decision of the Court of Appeal in Kenfit Limited v Consolata Father (Supra), I hold that the decision was per incuriam as the court’s attention was not drawn to Section 3(1) of the Arbitration Act which states that, ““arbitral award” means any award of an arbitral tribunal and includes an interim arbitral award.” This means that any award whether interim or otherwise is an award and may be enforced as it is an award under Section 36(1) of the Arbitration Act. Further, Section 36 does not qualify what kind of award may or may not be enforced. As a practical matter, it is inconceivable that an arbitral tribunal can issue interim or partial awards during the proceedings to resolve specific issues but which cannot be enforced until the final award. Just like the court may issue a preliminary decree, the Arbitration Act does not foreclose the issuing of interim awards that may be enforced as the arbitral proceedings continue."

19. Again, in Kimaryo v First Riverside Acres Limited & another (Miscellaneous Application E1283 of 2020) [2022] eKLR, Hon Majanja rehashed that:-“Further, I disagree with the Respondents that since the proceedings were not complete, the Applicant’s application for recognition and enforcement was premature. Under section 3(1) of the Arbitration Act, ““arbitral award” means any award of an arbitral tribunal and includes an interim arbitral award.” This means that any award whether interim or otherwise is an award and may be enforced as it is an award under section 36(1) of the Arbitration Act. Section 36 does not qualify what kind of award may or may not be enforced (see Dinesh Construction Limited and Another v Aircon Electra Services (Nairobi) Limited [2021] eKLR). I therefore find and hold that the Applicant’s application to enforce the Initial Award was not premature."

20. I am inclined to agree with the findings by Hon Majanja J on the two decisions cited above and find that in the present case, the application to enforce the award dated 30th August 2021 is not premature. The same is therefore allowed in the following terms:-1. The Final Award dated 30th August 2021 made by Mr. John M. Ohaga SC, CIArb, be and is hereby recognized and adopted as a judgment of this court; and the Applicant is hereby granted leave to enforce the Final Award as an order of this court.2. The 1st Respondent shall pay to the Applicant the costs of the application.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 11TH DAY OF JANUARY, 2024. ...................................J.W.W. MONG’AREJUDGEIn the Presence of:-Mr. Ngatia SC for the Applicant.Mr. Waigwa for the 1st Respondent.Mwangi for the 2nd Respondent.Amos - Court Assistant