Deloitte and Touche LLP Sued as Deloitte East Africa & 8 others v Admassie [2023] KECA 1504 (KLR)

Deloitte and Touche LLP Sued as Deloitte East Africa & 8 others v Admassie (Civil Application E261 of 2023) [2023] KECA 1504 (KLR) (8 December 2023) (Ruling)

Neutral citation: [2023] KECA 1504 (KLR)

Republic of Kenya

In the Court of Appeal at Nairobi

Civil Application E261 of 2023

S ole Kantai, F Tuiyott & PM Gachoka, JJA

December 8, 2023

Between

Deloitte And Touche LLP Sued as Deloitte East Africa

1st Applicant

Anne Muraya

2nd Applicant

Graeme Berry

3rd Applicant

Gladys Makumi

4th Applicant

Doreen Mbogho

5th Applicant

Arifa Sheikh

6th Applicant

Fred Okwiri

7th Applicant

Charles Luo

8th Applicant

Bernadette Wahogo

9th Applicant

and

Amaha Bekele Admassie

Respondent

(An application for stay of proceedings of the Ruling of the High Court of Kenya at Nairobi (Sifuna, J.) dated 30th May, 2023 in HCOMM Case No. E207 of 2023)

Ruling

1. The application in issue before this Court is dated 9th June, 2023. The applicants, Deloitte & Touche sued as Deloitte East Africa & 8 other applicants pray in the main for an order of stay of the ruling and proceedings by Justice Sifuna dated 30th May, 2023 Nairobi High Court Commercial Case No. E207 of 2023 pending hearing of the current application and the intended appeal.

2. The dispute revolves around the partnership in the 1st applicant; whether the respondent was expelled in accordance with the partnership deed; and whether the dispute ought to have been referred to arbitration. The suit at the High Court was filed by the respondent, Amaha Bekele Admassie after he was expelled as a partner of the 1st applicant. The application which gave rise to the impugned orders is dated May 12, 2023 and is still pending at the High Court. The respondent sought a temporary injunction restraining the current applicants from expelling him from the 1st applicant. He also sought a temporary injunction restraining the defendants (applicants here) or their agents from suspending payment of his monthly drawings. These orders were sought pending determination of the application and pending determination of the main suit.

3. On May 30, 2023 the High Court granted a temporary injunction against the removal of the respondent, expressly stopping the expulsion of the respondent as a partner of the 1st applicant. The Judge further ordered that any expulsion already done was of no effect. This order was issued pending inter parties hearing of the application.

4. The applicants were aggrieved by the orders and filed a notice of appeal dated June 2, 2023.

5. The application before us is supported by submissions dated June 22, 2023. The grounds relied on are that the Judge ought not to have granted a mandatory injunction to reinstate the respondent to the partnership when no such prayer had been sought; that the Court has forced the other applicant partners to contend with a relationship that has irretrievably broken down and that the applicants had filed a motion to stay the proceedings so that the matter could be referred to arbitration as per the partnership deed. The applicants state that they stand to suffer substantial losses due to the respondent’s partnership drawings and that the respondent was expelled due to his breach of the partnership deed. The applicants state that their appeal is arguable as the Judge acted suo moto giving orders when the respondent had already been expelled and that the Judge should have prioritized the application for stay pending reference to arbitration. They also submit that the respondent is a foreign national and has not given any undertaking for damages thus the appeal will be rendered nugatory if the stay is not granted.

6. The respondent filed a replying affidavit sworn on June 27, 2023 and submissions dated 24th July, 2023. He states that he has never been furnished with the partnership documents save for a partnership manual despite his requests since 2016. He states that the arguments on arbitration are premature as the application in that regard has not been heard and this Court should not make a finding on the issue. The respondent states that the applicants tried to forcefully remove him from the partnership without agreement on his compensation when they are not even the parties with power to expel him as a partner. He states that the Judge exercised his discretion fairly and the application ought to be dismissed with costs.

7. The respondent also filed a preliminary objection dated 7th August, 2023 but this was not argued before us.

8. The applicants had filed an application before the High Court invoking an arbitration agreement and urged the Judge to refer the dispute to arbitration in accordance with Section 6 of the Arbitration Act. The applicants had entered appearance to the suit at the High Court and did not file a defence, instead invoking the said section of the Arbitration Act. It is contended that the judge ought to have heard that application before issuing further orders.

9. The application came up for hearing before us on October 17, 2023 via the Court’s virtual platform, where the applicants were represented by learned counsel Miss Michi Kirimi while the respondent was represented by learned counsel Mr. Eredi. Both parties had filed written submissions and in a highlight of the same, Miss Kirimi for the applicants submitted that the Court reinstated the respondent into a partnership which he had been expelled from. Counsel submitted that the Judge was wrong to refuse to hear the application for reference of the dispute to arbitration when the applicants had invoked Section 6 of the said Act asking that the dispute be referred to arbitration.

10. Mr. Eredi for the respondent submitted that the applicants should not be given audience before this Court as they had already filed an application dated 21st June 2023, for review of the orders at the High Court; and having parallel proceedings over the same issue is an abuse of the court process and may potentially create a situation where conflicting directions are issued. The respondent urged this Court to find that the applicant’s notice of appeal was ineffective, or void, due to the pending application for review. The respondent’s counsel also submitted that this Court ought not to render a decision as to the reference to arbitration as that was still an active matter at the High Court and ought to be determined to enable any aggrieved parties approach this Court later on, on appeal, as they see fit. Counsel also stated that the Judge cannot be faulted for preserving the subject matter of the suit as the Judge also went ahead and gave directions on the applicant’s application for reference to arbitration.

11. Mr. Eredi also told the Court that the respondent had met the threshold for grant of the interim orders by the High Court and that proper expulsion had not happened; in any case, that the Court rightly deemed the expulsion a nullity prima facie; and that the clause on arbitration was denied. He asked the court not to interfere and to instead send the parties back to the High Court for determination of their respective applications.

12. When we heard the Motion on October 17, 2023 we ordered a stay of all proceedings in the said Nairobi High Court Commercial Case No. E207 of 2023 pending delivery of the ruling. These are the reasons for doing so.

13. We have considered the application and the submissions by the parties.

14. The principles that apply in an application for stay of execution or stay of proceedings pending an appeal are well known. For an applicant to succeed he must firstly demonstrate that the appeal, or intended appeal, as the case may be is arguable which is the same as saying that it is not frivolous. Such an applicant must, in addition, show that the appeal will be rendered nugatory absent stay - See the cases of Multimedia University & Another –Vs- Professor Gitile N. Naituli (2014)eKLR and Stanley Kangethe Kinyanjui vs. Tony Ketter & Others [2013]eKLR.

15. We have considered the draft Memorandum of Appeal. The applicants intend to argue that the Judge erred in extending interim orders when the respondent’s partnership with the applicant had already ceased; that the Court erred in refusing to give effect to Section 6 of the Arbitration Act to halt proceedings when there was an application before him to refer the dispute to arbitration. We find these to be arguable grounds and it has been held that a single arguable point will suffice as an applicant does not have to show a multiplicity of arguable grounds.

16. Regarding whether the appeal will be rendered nugatory, the applicants’ case is that the matter at the High Court will proceed despite the application to have the matter referred to arbitration, that the 1st applicant will incur expenses of paying the respondent as a partner when he had been expelled for failing to undertake obligations under the partnership agreement, that the respondent is a foreign national who has not given any undertaking as to damages in case the appeal succeeds. The applicants urge that they have met the threshold for grant of the orders sought.

17. We find that if the matter at the High Court proceeds when the applicants have invoked an arbitration agreement in terms of Section 6 of the Arbitration Act the appeal would be rendered nugatory as the parties would be robbed of the opportunity to resolve their dispute in an agreed way in terms of the arbitration agreement.

18. The applicants have satisfied the principles that apply in an application of this nature and we allow the Motion. There shall be a stay of proceedings in the said suit pending hearing and determination of the appeal. Costs of the Motion will be in the appeal.

DATED AND DELIVERED AT NAIROBI THIS 8TH DAY OF DECEMBER, 2023. S. OLE KANTAI…………………………JUDGE OF APPEALF. TUIYOTT…………………………JUDGE OF APPEALM. GACHOKA, FCIArb.………………………JUDGE OF APPEALI certify that this is a true copy of the original.SignedDEPUTY REGISTRAR