EPCO Builders Limited v Lemna International INC & National Housing Corporation [2018] KEHC 2930 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

COMMERCIAL AND ADMIRALTY DIVISION-MILIMANI

CIVIL CASE NO.365 OF 2017

EPCO BUILDERS LIMITED ............................................ PLAINTIFF/RESP

VERSUS

LEMNA INTERNATIONAL INC ..................................... 1ST DEFENDANT

NATIONAL HOUSING CORPORATION ...................... 2ND DEFENDANT

R U L I N G

This is a ruling on two applications. Application dated 9th January 2018 was filed by the 2nd Defendant (now struck out of the suit) seeking orders to review or vary the ruling of the Court delivered on 19th December 2018. The Defendant (former 1st Defendant) filed application dated 10th April 2018 seeking to stay proceeding herein and parties referred to arbitration.

Grounds on the Court allowed the 2nd Defendants Preliminary Objection striking the 2nd Defendant from the suit.

The 2nd Defendant contend that there is an error on the ruling in that it failed to make determination on costs. That it is in the interest of justice for the Plaintiff to be ordered to pay costs to the 2nd Defendant.

The application is supported by Affidavit sworn by William K. B. Keitany the Legal Officer of the 2nd Defendant. He restated grounds on the face of the application. In paragraph, 5 of the Affidavit he averred that under Section 27 of the Civil Procedure Act, costs should follow event and the 2nd Defendants Preliminary Objection having been allowed the 2nd Defendant should have been awarded costs of defending the suit.

Grounds on the 1st Defendants application are that the 1st Defendant was awarded contract by the second Defendant to erect and complete 230 housing units in Langata, Nairobi County and that it subcontracted the contract to the Plaintiff by contract dated 1st April 2011 for a sum of Kshs. 796,794,890.

That the Plaintiff further varied the contract sum from Kshs.796,794,890 to Kshs. 862,566,522. 00 and the said subcontract contained an arb.itration clause at clause 34. 0

The Defendant contends that it was the intention of the parties to the subcontract to submit disputes in respect of the agreement to arbitration.

The application is supported by the Affidavit sworn on 6th April 2018 by Brien Johnson the Chief Financial Officer of the Defendant. He restated grounds on the face of the application.

In response, the Plaintiff filed Replying Affidavit sworn on 22nd May 2018 by Ramji Devji Varsani the Plaintiff’s Managing Director.

He averred that there is no contractual dispute between the Plaintiff and the Defendant since the Plaintiff has performed all its contractual obligations under the contract; that what remain is for the Defendant to pay the sums due to the Plaintiff

Plaintiff further averred that the arbitration clause indicate that the venue for arbitration is London and in the event that arbitration take place in London, the Plaintiff stand to suffer grave injustice and will be denied access to justice as envisaged under Article 18 and 159(2) of the Constitution.

That the arbitration clause in agreement dated 1st April 2011 is incapable of being performed without undue delay, monolithic costs and injustice for the Plaintiff.

In respect of the 2nd Defendants application, it is true I did not make determination on costs in the ruling on the Preliminary Objection. In the said ruling, I found that there is no cause of action by the Plaintiff against the 2nd Defendant and struck out the claim against the 2nd Defendant. I note from the ruling that I did make a determination on costs in respect of claim between Plaintiff and 2nd Defendant.

It is not disputed that the 2nd Defendant filed defence and response to application filed. I agree with Counsels for the Plaintiff’s argument that award of costs is discretional. While exercising the discretion, it would however be unfair to deny a party who should not have enjoined in a suit costs expended in defending it. It was not my intention to deny the 2nd Defendant costs; failure to make a determination on costs was an inadvertent omission on my part.

From the foregoing, I find that the 2nd Defendant is entitled to costs incurred in defending this suit. I therefore correct the error on the ruling by ordering the Plaintiff to pay 2nd Defendant’s costs.

As concern Defendants (1st Defendant’s) application, I note that parties have not denied executing the agreement dated 1st April 2011. It is not also disputed that the agreement has arbitration clause under clause 34. 0.

The Plaintiff is opposed to referral to arbitration on ground that the venue as per contract is London and the dispute will not be determined without undue delay and that it will be costly.

Arbitration Act gives parties who have agreed to submit to arbitration, autonomy to decide the venue of Arbitration, law applicable and appointment of arbitrators. Parties are expected to voluntarily consent to refer dispute to arbitration for settlement. By so doing they oust the jurisdiction of the Court.

A party having agreed to submit to arbitration is bound by the agreement. Allowing a party to change terms of the contract will amount to the Court rewriting contract for the parties.

Parties herein must have known the implication of choosing London as a venue for arbitration proceedings. There is no indication that any of the parties was coerced to enter into the contract or any existence of fraud on any of the parties.

Once parties have agreed to have arbitration as their dispute resolution mechanism, the Court has no business interfering with terms of the agreement by entertaining the matter. By including arbitration clause in their agreement, parties are taken to have voluntarily chosen to submit their disputes to that mechanism of dispute resolution.

From the foregoing, I find that 2ndDefendant’s application dated 10th April, 2018 is merited and do allow it. Costs of the application in the cause.

FINAL ORDERS

1. 2nd Defendants application dated 9th January 2018 is hereby allowed; Plaintiff to pay 2nd Defendants cost for defending suit.

2. The Defendant’s (formerly 1st Defendant) application dated 10th April 2018 is allowed.

3. This matter is referred to arbitration.

4. Costs in the cause.

Ruling dated, signed, and delivered at Nairobi this 18th day of October, 2018.

……………………………….

RACHEL NGETICH

JUDGE

IN THE PRESENCE OF

CATHERINE: COURT ASSISTANT

NJENGA:  FOR PLAINTIFF/RESPONDENT

MS. ABOBO:COUNSEL FOR 2NDDEFENDANT/APPLICANT

NO APPEARANCE FOR FOR 1STDEFENDANT