Kenfit Limited v Consolata Fathers [2005] KEHC 1220 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

MISC. CIV. APLLI. 1592 OF 2003

IN THE MATTER OF THE ARBITRATION ACT, 1995

KENFIT LIMITED................................................APPLICANT

-VERSUS

CONSOLATA FATHERS...................................RESPONDENT

RULING

The applicant’s Chamber Summons of 16th December, 2003 was filed on 18th December, 2003. It was brought under rule 9 of the Arbitration Rules, 1997, and the prayers were: (i) that the Court do enter judgement in favour of the applicant and against the respondent, in the terms of an arbitration award dated 30th November, 2000; and (ii) that the costs of the application be provided for.

To this application the respondent had, on 13th February, 2004 filed both a notice of preliminary objection and grounds of opposition.

The following are the points taken in the Notice of Preliminary Objection:

(a) the arbitrator’s award sought to be converted into a Court judgement has not determined the issue of costs of the arbitration reference; instead it has reserved the issue to be finally determined by the arbitrator himself through taxation; and since the issue of taxation was duly submitted to the arbitrator and no determination has been made, the present application is premature and misconceived;

(b) all aspects of the arbitration award have been satisfied in full, except the undetermined question of costs which the arbitrator reserved to be specifically taxed by him if the parties are unable to agree — and this renders the present application unnecessary, frivolous and vexatious;

(c) the application is vague, ambiguous on the specific aspects of the arbitration award which have been satisfied;

(d) the arbitrator has not completed his tasks under the arbitration proceedings to warrant turning to the Court by the applicant;

(e) section 32(6) of the Arbitration Act, 1995 specifically states that the issue of costs in arbitration proceedings “shall be as determined and apportioned by the arbitral tribunal”, and since a final determination on this issue has not been given by the arbitrator, the application is bad in law;

(f) the applicant’s Chamber Summons is oppressive to the respondent in the circumstances of this matter.

The same points in the preliminary objection are substantially replicated in the respondent’s grounds of opposition dated and filed on 13th February, 2004.

The preliminary objection was presented before me on 5th May, 2005 when Mr. Oyugi represented the applicant, whileMr. Mwiti represented the respondent.

Mr. Mwiti began from the content of the arbitrator’s final award, dated 30th November, 2000, paragraph 10 of which relates to costs, and states:

“The costs of this reference together with the arbitrator’s costs to be paid by the respondent on party to party basis and to be submitted for taxation if parties are unable to agree.”

Annexed to the replying affidavit is a letter from the applicant to the arbitrator, indicating that there has been no agreement on costs. The letter, dated 1st March, 2001 reads:

“Reference is made to the Final Award dated 30th November, 2000…the paragraph [10. 0] on costs.

“The parties are unable to agree on the costs of the reference and indeed what the costs of the reference are made of.

“Enclosed please find a copy of our costs charged by the Quantity Surveyor who participated in preparations of our submissions for taxation since we are not able to agree.”

Mr. Mwiti submitted that, so long as the arbitrator had not yet determined the costs, his award was incomplete, and could not in this form be the basis of Court judgement. He submitted that the instant application was premature, and that the applicant should first sort out the issue of costs with the arbitrator, before requesting the Court to give judgement incorporating the award. He noted that s.32(6) of the Arbitration Act, 1995 had spelt out quite clearly that the costs of any arbitration reference are to be determined by the arbitrator if the parties do not agree. S.32(6) thus provides:

“(6) Unless otherwise agreed by the parties —

(a) the costs and expenses of an arbitration, being the legal and other expenses of the parties, the fees and expenses of the arbitral tribunal and any other expenses related to the arbitration, shall be as determined and apportioned by the arbitral tribunal in its award under this section…

“(b) in absence of an award or additional award determining and apportioning the costs and expenses of the arbitration, each party shall be responsible for the legal and other expenses of that party and for an equal share of the fees and expenses of the arbitral tribunal and any other expenses relating to the arbitration.”

Mr. Mwiti submitted that, determining the quantum of costs was the responsibility of the arbitrator, and, as the arbitrator had not made an award on costs, he had not yet exhausted his jurisdiction, and hence it would be premature for the Court to enter judgement. Until the costs issue was determined, learned counsel submitted, it would be improper to bring the application before the Court.

Mr. Mwiti impugned the application for incompetence, on account of vagueness. It is stated as ground (iii) in support of the application that “the award has been partially satisfied by the respondent”; but there is no indication of the aspects of the award that have been so satisfied, and what aspects are still outstanding. In counsel’s words, “Vagueness makes the application incompetent and bad in law.”

It seems to me that Mr. Mwiti’s concern about vagueness of the application is not a theoretical one. The Court is being asked to give judgement that will result in binding decrees, and if it did so on an undefined foundation of accomplished or non-accomplished tasks, this may raise problems in relation to compliance — and it is contended that this would be prejudicial to the respondent. In learned counsel’s words, “a blank cheque of a judgement in terms of the arbitration award is being sought.”

Learned counsel also raised a technical ground for striking out the supporting affidavit attached to the applicant’s Chamber Summons of 16th December, 2003. This affidavit sworn by Edward Mbugua Kamau on 16th December, 2003 does not comply with the endorsement procedure provided for under sections 34 and 35 of the Advocates Act (Cap. 16). The affidavit does not state who drew or filed it, as is required — and so it fails to comply with the law.

The same deponent, on 24th February, 2004 swore a further affidavit which, this time around, bears the required endorsement at the end of the advocates who drew and filed the same: and those advocates are M/s. Karuru Mwaura & Co. Advocates, quite different from M/s. Oyugi & Co. Advocates who are the advocates having conduct of this matter on behalf of the applicants. Learned counsel submitted thatM/s. Karuru Mwaura & Co. Advocates are not shown to have taken over the conduct of the matter on behalf of the applicant, and so they cannot be the agent of the applicant in the matter. Counsel submitted that an application with such technical flaws — flaws which touched on substantive requirements of the law, notably the Advocates Act (Cap.16) — was incompetent and ought to be struck out or dismissed with costs to the respondent.

Learned counsel for the applicant,Mr. Oyugi was of the view that the improper endorsement of the supporting affidavit of 16th December, 2003 was not a ground for attributing nullity to the deposition. He was armed with authority: Greenhills Investments Ltd v. China National Complete Plant Export Corporation (Complant) t/a COVEC [2002] 1 KLR 384. Mr. Justice Ringera in that case had held (p.388):

“On whether or not an affidavit should on the face thereof indicate by whom it was drawn and upon whom it is to be served, I agree with the submissions of the decree-holder’s advocate that there is no such requirement in law. It is definitely not in the Oaths and Statutory Declarations Act (Cap. 15 of the Laws of Kenya) or the Civil Procedure Rules and the objector’s advocate did not pinpoint which other statute or rule of Court required any such indication. I think the advocate must have been labouring under the erroneous assumption that an affidavit is a pleading, which it is not.”

Mr. Oyugi relied on yet another decision of the High Court, Dubai Bank Kenya Ltd v. Come-Cons Africa Ltd, Civil Case No. 68 of 2003. Justice Ibrahim in that case held:

“…I do hold that there is no word, statement or stipulation in section 35(1) and (2) that renders an instrument or document with the omission of the endorsement of the name and address of the advocate who drew or prepared, incurably invalid, void or defective. I do accept that the…affidavit in its form has omitted a very necessary feature which is expressly stipulated by the law, an Act of Parliament. From a reading of sections 34 and 35, the said document made in violation of the law is defective. It should hot have been allowed to be filed in the first place in order to ensure that section 35(2) is applied effectively and effectually to remedy the mischief intended by the legislature. It is my opinion that the purpose for which section 35(2) was intended was to discourage or put an end to situations where unqualified persons prepare legal documents in legal proceedings. By making it mandatory that the instruments on legal proceedings are endorsed with the name and address of the drawer, this would make it impossible for an unqualified person to present such documents at the registries and if he did then the law would take its course…”

Learned counsel then drew the Court’s attention to a decision of Justice Azangalala inGeology Investments Ltd v. Rogonyo Njuguna & Others, Civil Suit No. 1067 of 2002: the learned Judge held:

“It is obvious therefore that [sections 34 and 35 of the Advocates Act (Cap. 16)] protect mainly advocates. The sections were not in my view intended to invalidate documents or instruments by advocates who had omitted to endorse their names and addresses.

“The …. affidavit in this case save for the said omission qualifies as a verifying affidavit. It is not wanting in any other form or content. It does not offend the provisions of [Section 18] of the Oaths and Statutory Declarations Act (Cap. 15, Laws of Kenya).”

Relying on the above persuasive authorities, learned counsel, Mr. Oyugi urged that the supporting affidavit of 16th December, 2003 be admitted, notwithstanding its defect.

On the question whether the arbitrator should still determine the costs before the Court is moved, Mr. Oyugi cited the content of s. 33(1) of the Arbitration Act, 1995:

“(1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under subsection (2).

“(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where —

(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute;

(b) the parties agree on the termination of the arbitral proceedings; or

(c) the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible.”

Learned counsel interpreted the above provision to mean that once a final award has been made by the arbitrator, his jurisdiction is exhausted and he has become functus officio. For this proposition counsel sought to rely onHalsbury’s Laws of England, 4th edition (Vol.2), in which the following   passage appears (para.607):

“Powers of arbitrator or Court. Unless a contrary intention is expressed therein every arbitration agreement is deemed to include a provision that the costs of the reference and award are to be in the discretion of the arbitrator or umpire, who may direct to and by whom and in what manner these costs or any part thereof are to be paid and may tax or settle the amount of costs to be so paid or any part thereof, and may award costs to be paid on the common fund basis. Any costs directed by an award to be paid are, unless the award otherwise directs, taxable in the High Court. If no provision is made by an award with respect to the costs of the reference, any party to the reference may, within fourteen days of the publication of the award or such further time as the High Court or a judge thereof may direct, apply to the arbitrator for an order directing by and to whom those costs shall be paid, and thereupon the arbitrator must, after hearing any party who may desire to be heard, amend his award by adding to it such directions as he may think proper with respect to the payment of the costs of the reference.”

Mr. Oyugi submitted that the arbitrator’s award was final and binding; and hence it was proper to apply to the Court to adopt it in a judgement.

Learned counsel also urged, that what the respondent had brought before the Court was not a genuine preliminary objection, because it involved unresolved matters of fact. And he cited the Court of Appeal decision in Wreck Motor Enterprises v. The Commissioner of Lands & Others, Civil Appeal No. 71 of 1997, as a basis for the now well-recognised principle that a preliminary objection is a pure point of law in respect of which no facts are required to be proved. Counsel did not, however, set out the range of facts which he had in mind, and did not develop this argument any further.

In his reply, Mr. Mwitisubmitted that the arbitrator’s award had not yet become binding, and he was still seized of the matter: for the award had reserved one matter to the arbitrator — costs. What had been issued, counsel submitted, was a conditional award. For this concept, counsel relied onHalsbury’s Laws of England, 4th ed, vol.2, para. 610:

“The award must be final, and therefore a conditional award is bad unless it provides an alternative in case the condition is not fulfilled.”

An alternative, counsel submitted, was provided in the present instance; and so the award cannot at this stage be enforced by a general judgement. If such a judgement is given, counsel submitted, then the respondent would have no forum for protecting himself against a possible levying of execution.

Although the arbitrator had made an award which is described as a “final award,” he left open the costs question — which is a vital question, resolving which could entail execution against one of the parties. This omission, ex facie, carries the message that the arbitration process is incomplete. And if it was incomplete, as counsel for the respondent urged, then there would be no basis for converting the award into a judgement of the Court.

The arbitrator had decided that —

“The costs of this reference together with the arbitrator’s costs…be paid by the respondent on party-to-party basis and … be submitted for taxation if parties are unable to agree.”

This means the arbitrator reserved the taxation of costs, if the parties failed to reach agreement. Since it is on record that, indeed, they failed to reach agreement, this must mean that the matter was to go back to the arbitrator for determination. Is there a basis for conversion of the award to a judgement of the Court?

Mr. Mwiti impugned the plaintiff’s application for being supported by a replying affidavit that does not bear proper endorsements at the end. I think the question of the legal consequence of a failure to properly endorse an affidavit, is today “at large” in the High Court; for different Judges have taken different positions, so that it is necessary to have proper direction in an authoritative decision of the Court of       Appeal. Alternatively it would be necessary for Parliament to consider a suitable amendment to the Oaths and Statutory Declarations Act (Cap. 15), to redefine the requirements in the formulation of affidavits. Having taken this position, I can only remark that  the supporting affidavit of 16th December, 2003 is defective, but I would not go as far as striking it out. Thus, I will not regard the said defect of the affidavit as the vital legal point which leads me to strike it out and consequently strike out the entire application as well.

The various points considered in this ruling, lead me to the conclusion that the stage has not yet been reached when it would be proper to invite the Court to give a judgement incorporating the arbitrator’s award. An application in that regard could be made only after the arbitrator has determined all questions referred to him, including the important matter of costs. As there is no legal basis upon which the Court could give the judgement requested, it follows that the application is premature.

I therefore uphold the respondent’s preliminary objection and strike out the applicant’s Chamber Summons of 16th December, 2003 with costs to the respondent.

Orders accordingly.

DATED and DELIVERED at Nairobi this 17th day of June, 2005.

J. B. OJWANG

JUDGE

Coram: Ojwang, J.

Court clerk: Mwangi

For the Applicant: Mr. Oyugi, instructed by M/s Oyugi & Co. Advocates

For the Respondents: Mr. Mwiti, instructed by M/s. Muthoga Gaturu & Co. Advocates.