Maangi Construction and General v County Government of Kitui, Lucas A. N. Ochieng & Chartered Institute of Arbitrators(Kenya Chapter) [2020] KEHC 670 (KLR) | Arbitration Award Challenge | Esheria

Maangi Construction and General v County Government of Kitui, Lucas A. N. Ochieng & Chartered Institute of Arbitrators(Kenya Chapter) [2020] KEHC 670 (KLR)

Full Case Text

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL & TAX DIVISION

MISCELLANEOUS APPLICATION NO. E 846 OF 2020

MAANGI CONSTRUCTION AND GENERAL..........................................................APPLICANT

-VERSUS-

COUNTY GOVERNMENT OF KITUI ........................................................... 1ST RESPONDENT

ENG. LUCAS A. N. OCHIENG........................................................................ 2ND RESPONDENT

CHARTERED INSTITUTE OF ARBITRATORS (KENYA CHAPTER)....3RD RESPONDENT

RULING

1. It is doubtful whether these proceedings, brought by way of a Notice of Motion dated 13th July 2020, can surmount at least two hurdles.

2. The Motion seeks the following  substantive orders:

1. That the arbitration proceedings and award herein if any be set aside.

2. That the 2nd Respondent be forthwith removed from being an arbitrator in the aforementioned Arbitration proceedings.

3. That the 2nd Respondent be cited for gross misconduct, lack of integrity, prejudice, incompetence, collusion and corruption.

4. That the 2nd Respondent be referred for disciplinary action by the 3rd Respondent and by the Engineers Board of Kenya.

5. That the 2nd Respondent be condemned to pay all costs incurred by the parties before, during and after the said Arbitration proceedings.

6. That the 2nd Respondent be condemned to pay the costs of these proceedings.

7. That other appropriate orders be made.

3. There is a dispute between Maangi Construction and General (the Applicant or Maangi) and the County Government of Kitui (the 1st Respondent or CGK) over a road construction. The dispute was referred to the arbitration of Lucas A. N. Ochieng (the 2nd Respondent or Arbitrator).  The arbitration commenced on 5th November 2018.

4. Maangi states that in the course of the arbitral proceedings, the Arbitrator declined an application by CGK which had sought to adduce additional evidence.  This was in a ruling dated 21st May 2019. That the hearing was then concluded and parties filed written submissions.

5. Maangi avers that the Arbitrator promised to make the award within one month but through a letter dated 20th April 2020, and without prompting by the parties to the dispute, reopened the matter to allow the claimant to adduce the rejected evidence and file documents related to it. In effect, the Applicant argues, the Arbitrator overturned his ruling of 21st May 2019.

6. Aggrieved by this change of circumstances, the advocates for the Applicant protested the re-opening of the proceedings and requested the Arbitrator to recuse himself if he did not heed to the protest.

7. That on 5th May 2020, the Arbitrator declined both requests and so in a letter of which came on the following day, the Applicant informed the Arbitrator that it could no longer participate in the process.

8. It is stated by Maangi that the Arbitrator thereafter purported to make an award and demanded fees of Kshs. 4 Million from the parties in addition to fees already paid.

9. Maangi bespeaks orders setting aside the award and an order that he refunds all monies incurred by the parties in the Arbitral proceedings and, in addition, costs of these proceedings. Further, Maangi asks this Court to order the Chartered Institute of Arbitrators (Kenya Chapter) (the 3rd Respondent or CIAK) to institute disciplinary proceedings against the Arbitrator and to forward the report to the Engineers Board of Kenya for its further action.

10.  For CGK, it is argued that the Arbitral Award is yet to be published although ready for collection.  That without a published award, the jurisdiction of this Court under section 35 of the Arbitration Act (The Act) cannot be invoked.

11. Separate, it is contended that the procedure to challenge the composition of an Arbitral Tribunal is embodied in section 14 of the Act and it must be done within 15 days of a challenging party becoming aware of circumstances necessitating such challenge and writing to the Tribunal with reasons for the challenge. Further, if the challenge procedure is unsuccessful, a challenging party can within 30 days after being notified of the decision to reject the challenge apply to the High Court to determine the matter.  It is stated that as parties were notified of the decision to reject the challenge by Maangi on 5th May 2020, the application before Court is out of time.

12. The Court will not delve on merit based issues raised by CGK for reasons that become apparent shortly.

13. As for the Arbitrator, he displays a notice of publication of the Award dated 8th May 2020.

14. I have read the written submissions filed herein.  In its arguments to Court, the Applicant states that this application is brought under the ambit of the Constitution and that the Court should not give regard to minor statutory requirements.  And this is where the Applicant starts to face a difficulty.

15. The extent of Court’s intervention in matters governed by the Act is circumscribed in the unequivocal words of section 10 of the Arbitration Act.  That crisp, but important, provision reads:-

“Except as provided in this Act, no court shall intervene in matters governed by this Act.”

The centrality of those provisions on how far the Courts can intercede in matters governed by the Act has been acknowledged time and time again by our Courts. The Highest Court in the land, the Supreme Court, recently in Nyutu Agrovet Limited v Airtel Networks Kenya Limited; Chartered Institute of Arbitrators-Kenya Branch (Interested Party) [2019] eKLR stated as:-

“[57] Thus, it is reasonable to conclude that just like Article 5, Section 10 of the Act was enacted, to ensure predictability and certainty of arbitration proceedings by specifically providing instances where a Court may intervene. Therefore, parties who resort to arbitration, must know with certainty instances when the jurisdiction of the Courts may be invoked. According to the Act, such instances include, applications for setting aside an award, determination of the question of the appointment of an arbitrator and recognition and enforcement of arbitral awards amongst other specified grounds.

[58] Having stated as above therefore we reject Nyutu’s argument that Section 10 is unconstitutional to the extent that it can be interpreted to limit the Court of Appeal’s jurisdiction to hear appeals arising from decisions of the High Court determined under Section 35 of the Act. We have shown that Section 10 is meant to ensure that a party will not invoke the jurisdiction of the Court unless the Act specifically provides for such intervention.  With regard to Section 35, the kind of intervention contemplated is an application for setting aside an arbitral award only. However, Section 10 cannot be used to explain whether an appeal may lie against a decision of the High Court confirming or setting aside an award. This is because by the time an appeal is preferred, if at all, a Court (in this case the High Court) would have already assumed jurisdiction under Section 35 and made a determination therefore. Thus, by the High Court assuming jurisdiction under Section 35, it would conform to Section 10 by ensuring that the Court’s intervention is only on instances that are specified by the Act and therefore predictability and certainty commended by Article 5 of the Model Law is assured.  The question whether an appeal may lie against the decision of the High Court made under Section 35 thus still remains unanswered because, just like Section 35, Section 10 does not answer that question.”

16. The Applicant, in its submissions, accepts that it challenged the Arbitrator under section 14 of the Act.  Section 14 provides:-

“14.   Challenge procedure

(1)  Subject to subsection (3), the parties are free to agree on a procedure for challenging an arbitrator.

(2)  Failing an agreement under subsection (1), a party who intends to challenge an arbitrator shall, within 15 days after becoming aware of the composition of the arbitral tribunal or after becoming aware of any circumstances referred to in section 13(3), send a written statement of the reasons for the challenge to the arbitral tribunal, and unless the arbitrator who is being challenged withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

(3)  If a challenge under agreed procedure or under subsection (2) is unsuccessful, the challenging party may, within 30 days after being notified of the decision to reject the challenge, apply to the High Court to determine the matter.

(4)  On an application under subsection (3), the arbitrator who was challenged shall be entitled to appear and be heard before the High Court determines the application.

(5)  The High Court may confirm the rejection of the challenge or may uphold the challenge and remove the arbitrator.

(6)  The decision of the High Court on such an application shall be final and shall not be subject to appeal.

(7)  Where an arbitrator is removed by the High Court under this section, the court may make such order as it thinks fit with respect to his entitlement (if any) to fees or expenses or the repayment of any fees or expenses already paid.

(8) While an application under subsection (3) 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 an award shall be void if the application is successful.”

17. As this challenge was after the commencement of the proceedings and before the award was made, it would have to be in respect to circumstances referred to in section 13(3) of the Act (see section 14(2)).  Section 13 (3) reads:-

“An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his impartiality and independence, or if he does not possess qualifications agreed to by the parties or if he is physically or mentally incapable of conducting the proceedings or there are justifiable doubts as to his capacity to do so.”

18. In so far as sections 13(3) and 14 seek to uphold the integrity of Arbitral proceedings by providing an avenue for challenging an arbitrator where there are justifiable doubts as to his impartially and independence, there was no need for the Applicant to fall back to constitutional provisions. The provisions of the Act are in line with the constitutional dictates of fair hearing.

19. And because the challenge before the Arbitrator was under section 14 of the Act, it was incumbent upon Maangi to follow through his challenge to the High Court if dissatisfied with the rejection of his challenge before the Arbitrator. The time for such challenge is set out in section 14(3) of the Act to be 30 days after the challenging party is notified of the decision to reject the challenge.  The Applicant concedes that it is out of time but cites the Covid pandemic. But this Court doubts this to be a plausible reason as it is in the public domain that online filing of applications to Court has been available throughout this sad period. In any event no attempt to expand time has been demonstrated.

20. The timelines set out in sections 14(2) and 14(3) are important because Arbitral proceedings are intended to be expeditious and any challenge that may cause their delay must be raised and dealt with promptly. In addition there is implication as to the taking of effect of an award if the proceedings are allowed to continue and concluded notwithstanding the pendency of a challenge application before Court.  No award takes effect until the application is decided and such an award is void if the application is successful.

21. The challenge application before Court is time barred.

22. As regard the setting aside application, the provisions in that respect is section 35 of the Act and there is no need to import the provisions of the Constitution. Section 35 provides:-

“35.   Application for setting aside arbitral award

(1)  Recourse to the High Court against an arbitral award may be made only by an application for setting aside the award under subsections (2) and (3).

(2)  An arbitral award may be set aside by the High Court only if—

(a) the party making the application furnishes proof—

(i) that a party to the arbitration agreement was under some incapacity; or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication of that law, the laws of Kenya; or

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the reference to arbitration or contains decisions on matters beyond the scope of the reference to arbitration, provided that if the decisions on matters referred to arbitration can be separated from those not so referred, only that part of the arbitral award which contains decisions on matters not referred to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless that agreement was in conflict with a provision of this Act from which the parties cannot derogate; or failing such agreement, was not in accordance with this Act; or

(vi) the making of the award was induced or affected by fraud, bribery, undue influence or corruption;

(b) the High Court finds that—

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of Kenya; or

(ii) the award is in conflict with the public policy of Kenya.

(3)  An application for setting aside the arbitral award may not be made after 3 months have elapsed from the date on which the party making that application had received the arbitral award, or if a request had been made under section 34 from the date on which that request had been disposed of by the arbitral award.

(4) The High Court, when required to set aside an arbitral award, may, where appropriate and if so requested by a party suspend the proceedings to set aside the arbitral award for such period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of the arbitral tribunal will eliminate the grounds for setting aside the arbitral award.”

23. The notice of publication of the award dated 8th May 2020 is the date when parties are taken to have received the award because delivery of the award is taken to be when the Arbitral Tribunal gives, yields possession, releases or makes available for collection a signed copy of the award to the parties (University of Nairobi vs Multiscope Consultancy Engineers Limited [2020] eKLR). For that reason the Application for setting aside is not time barred.

24. Yet the award itself is not before Court as the Applicant has not collected it from the Arbitrator and none has been displayed by the other parties to this application.  The onus is on the Applicant to furnish proof that matters or circumstances set out under section 35(2) of the Act exist so as to necessitate the setting aside of the award.  In the matter before Court the Arbitrator is accused of impartiality and misconduct.  The award and outcome thereof is not before Court to enable it make a call that it is just to set aside it because of the allegations levelled against the Arbitrator.  And I must wonder whether the Applicant would still insist on a setting aside order if it turned out that the Award was in its favour?

25. The Application of 13th July 2020 is dismissed with costs.

Dated, Signed and Delivered in Court at Nairobi this 7th Day of December 2020

F. TUIYOTT

JUDGE

ORDER

In view of the declaration of measures restricting Court operations due to the COVID-19 pandemic and in light of the directions issued by his Lordship, the Chief Justice on 17th April 2020, this Ruling has been delivered to the parties through virtual platform.

F. TUIYOTT

JUDGE

PRESENT:

Mulemi for Applicant.

Makau for 1st Respondent.

Mutubwa for 2nd Respondent.

No appearance for the 3rd Respondent.