M/S Mecko Enterprises v Principal Secretary, Ministry of Education, Chairman, Board of Governors, Ng'iya Girls High School, Attorney General, Secretary/Co-ordinator, Economic Stimulus Programme & Cabinet Secretary, National Treasury [2017] KEHC 10090 (KLR) | Arbitration Awards | Esheria

M/S Mecko Enterprises v Principal Secretary, Ministry of Education, Chairman, Board of Governors, Ng'iya Girls High School, Attorney General, Secretary/Co-ordinator, Economic Stimulus Programme & Cabinet Secretary, National Treasury [2017] KEHC 10090 (KLR)

Full Case Text

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL AND TAX DIVISION

MISC. APPLICATION NO. 445 OF 2013

M/S MECKO ENTERPRISES......................…..........................APPLICANT

VERSUS

THE PRINCIPAL SECRETARY,

MINISTRY OF EDUCATION............................................1ST RESPONDENT

THE CHAIRMAN, BOARD OF GOVERNORS,

NG'IYA GIRLS HIGH SCHOOL......................................2ND RESPONDENT

ATTORNEY GENERAL...................................................3RD RESPONDENT

SECRETARY/CO-ORDINATOR,

ECONOMIC STIMULUS PROGRAMME ......................4TH RESPONDENT

CABINET SECRETARY, NATIONAL TREASURY..........5TH RESPONDENT

RULING

[1]The Applicant, Mecko Enterprises, moved the Court vide the Notice of Motion dated 6 September 2017,under Article 159(1), 47(1) and 227(1) of the Constitution of Kenya, Section 48 of the Public Procurement and Disposal Act, 2005, Section 10 of the Arbitration Act, No. 4 of 1995, Section 3(4)of theEvidence Act, Chapter 80of theLaws of Kenya and Sections 1, 1A, 3, 3Aand26(1) of the Civil Procedure Act, Chapter 21of the Laws of Kenya, for orders that:

[a] The Court be pleased to find that the Respondents arbitrarily delayed in settling the principal sum of Kshs. 31,873,133. 80 by 1,711 days and that they should therefore pay Kshs. 26,883,255 for the late payment;

[b] That the Court be pleased to withdraw the Applicant's Notice of Motion dated 30 June 2017 with no order as to costs; (Spent)

[2]The application was premised on the following grounds, which have been expounded on in the Supporting Affidavit of the Applicant annexed thereto:

[a]That on face value of the Final Certificate of 13 February 2012 by the ESP Project Consultants, the Decree Order No. 7 of 19 March 2014 and the Consent Order No. 3 of 20 June 2016 in Nairobi Civil Appeal No. 54 of 2015,the Respondents had specific timelines to settle the principal sum as the matter is of a commercial nature; but that the Respondents, without any logical reasons, delayed for 1,711 days in making the payments;

[b]That the transaction in question was of a commercial nature whereby late payment would automatically attract interest, but that the Respondents have refused and ignored their obligation to pay the late payment component despite requests to do so;

[c]That the amount claimed for is not disputed and it is not part of the settled decree; but is claimable by law; and that the refusal  to pay by the Respondents has put the Applicant at great risk of suffering losses as a result.

[3]In his Supporting Affidavit sworn on 6 September 2017,the Applicant averred that, the ESP Project Consultants issued a Final Certificate for payment on 13 February 2012; and that the Respondents had 30 days to settle the said Certificate in terms of Order No. 7 in the Decree of 19 March 2014; but that final payment was not made until 24 January 2017, after a delay of a period of 1,711 days. It was further averred that the amount claimed is not disputed, and is not part of the settled decree, but was provided for in the Contract between the parties at Clause 23. 3 and 23. 4 thereof; and that the transaction being commercial in nature, automatically attracted interest for late payment. It was, thus, the contention of the Applicant that, since the delay by the Respondents in making payment has led to the collapse of his business, it would only be just and equitable that they be compelled to pay for the late payment.

[4]The Respondents opposed the application and relied on the Grounds of Opposition filed herein on 15 September 2017 by Mr. Emmanuel Kiarie, the 3rd Respondent's Litigation Counsel. Their basic argument is that the issue of interest has been finally determined herein, and is therefore res judicata. Counsel relied on the Rulings of the Court herein dated 26 February 2014 and 30 June 2017, as well as the Ruling of Odunga, J. in High Court Miscellaneous Application No. 414 of 2014, in urging the Court to find that the instant application amounts to abuse of the Court process and to dismiss it with costs.

[5]The application was argued on 18 September 2017 and in support of his application, the Applicant reiterated his contention that the Respondents failed to pay the principal sum within the agreed period, and was therefore under obligation to pay interest on late payment for a period of 1,711 days, equivalent to 4 years and 6 months. He relied on Annexure 22 to demonstrate that late payment would attract interest based on the number of days in issue. He also cited Section 48 of the Public Procurement and Disposal Act, No. 3 of 2005 to buttress his argument that interest is payable on late payment; and relied on the case of Nalinkumar M. Shah vs. Mumias Sugar Co. Ltd [2010] eKLRin urging the Court to allow his application and grant an order that he be paid interest for late payment as prayed.

[6]In his submissions before the Court, Mr. Kiarie for the Respondents traced the history of this matter and urged the Court to note that this dispute was resolved by way of arbitration and that a Final Award was consequently made on 30 September 2013. He further stated that, being aggrieved by the Award, the 2nd and 3rd Respondents challenged the same as provided for in the Arbitration Act, and a Ruling was delivered by Kamau, J. on 26 February 2014, by which the interest component was set aside. Thereafter, the Applicant's Chamber Summons application dated 17 March 2014 for the adoption of the Award came up for hearing, in respect of which the parties recorded a Consent before Kamau, J. for the adoption of the Award in so far as it was consistent with the Ruling of 26 February 2014.

[7]It was the submission of Mr. Kiarie that the Respondents did pay the Applicant the principal sum in full as well as the costs of the Arbitrator; and that the Respondents have therefore fully settled their obligations. He, thus, urged the Court to deprecate the conduct of the Applicant in continuing to file numerous applications in abuse of the court process, contending that the issue around the payment of interest has been heard and finally determined herein as well as by Odunga, J. in High Court Misc. Application No. 414 of 2014: Republic vs. Attorney General & Others, ex parte Meshack Ochieng.He further argued that Section 10 of the Arbitration Act permits the Court's intervention in arbitration matters only in the manner set out in the Act under Sections 34to36 thereof; and that it does not provide for review of an Award. According to him, the prayer for interest had not been pleaded and therefore cannot succeed, more so because there is no consent between the parties for the payment of interest on delayed payment. Counsel accordingly urged the Court to dismiss the Notice of Motion dated 6 September 2017 with costs.

[8]From a careful consideration of all the matters aforesaid, it is manifest that the only issue between the parties herein, is the question whether the Applicant is entitled to interest for late payment in the sum of Kshs. 26,883,255/=.The main dispute between the parties was resolved by way of arbitration, and the Arbitrator, QS, Newton DishonMaungu, presided over the arbitration and published his Final Award in the matter. The said Award was adopted by consent herein and the principal sum has since been paid by the Respondents. There is accordingly no disputation that the Applicant was entitled to the principal sum or interest thereon. Of course the aspect of compound interest was subsequently set aside by the Court vide the Ruling dated 26 February 2014, as it was entitled to do pursuant to Section 35 of the Arbitration Act; but the Court was categorical that:

"The first place the issue of compound interest arose in the   Arbitral Award is under Clause 42. 5 of the Arbitral Award. Parties do not appear to have made any submissions on the same. The logical conclusion that this court makes is that the question of awarding compound interest was not an issue that was contemplated by or falling within the terms of reference and that consequently, the decision of awarding compound interest to the Respondent who had not sought the same, went beyond the scope of the reference of the arbitration. On this ground, the Arbitral Award can be set aside as Clause 23. 3PPOA Standard Conditions provided for awarding of simpleinterest only....For the foregoing reason, this court hereby sets aside the award on compound interest of 17. 5% per  annum on the amount of Kshs. 30,571,250. 10. The court cannotinterfere with the rate of 17. 5% per annum as Section 32C ofthe Act gives the arbitral tribunal the discretion to determinethe rate to be specified in the Arbitral Award."(Emphasis added)

[9]To my mind therefore, the Applicant cannot be faulted for arguing, the foregoing decision on compound interest notwithstanding, that he was entitled to simple interest as this is what the parties expressly agreed on under Clause 23. 3 of their Contract, which reads:

"Payments shall be adjusted for deductions for retention. The Employer shall pay the Contractor the amounts certified by the Project Manager within 30 days of the date of issue of each certificate. If the Employer makes a late payment, the Contractor shall be paid simple interest on the late payment in the next payment. Interest shall be calculated on the basis of the number of days delayed at a rate three percent points above the Central Bank of Kenya's average rate for base lending prevailing as of the first day the payment becomes  overdue."

[10]  However, as was pointed out in the Ruling dated 30 June 2017, at the time of adoption of the Award, the parties, out of their own volition recorded a consent in the following terms:

"By consent, the Plaintiff's Chamber Application dated 15 October 2013 and filed on 16 October 2013 is settled in the following terms:

[a] That the said application be allowed in terms of Prayer No. (1), (2) and (6).

[b] That Prayers (3), (4) and (5) of the said application be dismissed.

[c] That there be a stay of execution for thirty (30) days.

[d] That each party shall bear its own costs of the application.

[e] Orders accordingly."

[11]  In the premises, I expressed myself on the matter as to whether the consent order can be reopened and, at Paragraph 17 of the Ruling dated 30 June 2017, this is the conclusion I reached:

"Thus, while the Applicant had the opportunity to assert its   claim to interest on late payment in the Consent Order, the court record shows that, instead of doing so, he voluntarily and  unequivocally waived this right by telling the Court that "I can do away with Prayer Nos. (3), (4) and (5) of my application" Prayer (5) being the prayer that sought interest on late payment. Having taken a conscious step to relinquish his claim to interest, it cannot be said that there was any aspect of  the Consent Order that remained to be fulfilled."

[12]In the premises, the issue of interest on late payment is already res judicata, and the Court said so at Paragraph 11 of the Ruling of 30 June 2017. Indeed, in HCMA No. 414 of 2014, Odunga, J., in a Ruling delivered on 23 March 2017, also had occasion to consider the very question of whether interest on delayed payment is due as claimed herein, and made a determination that that particular aspect had been compromised by virtue of the Consent Order of 18 March 2014. Here is what he had to say:

"In this case, according to the decree arising from the consent the total sum decreed is indicated as Kshs. 31,873,133. 80. There is however no mention of interest. According to the said decree one of the orders which was sought in the application that gave rise to the consent order was prayer 5 which sought "an order for interest as ordered by the arbitrator from the date of the award till payment in full". However in the decree this prayer is indicated as having been dismissed. The effect of recording of a consent is that the claim in question is compromised...Therefore without pinpointing to a specific order that expressly awarded interest to the ex parte applicant  after the decree was entered, for this Court to direct the  Respondents to pay interest to the ex parte applicant, this Court would in effect be varying the decree, a jurisdiction this Court does not have..."

[13]  In the foregoing premises, I would agree with Counsel for the Respondents that indeed the subject matter of the instant application is res judicata and that it does amount to abuse of the court process for the Applicant to engage in the filing of repetitive motions in respect of the same issue. In Uhuru Highway Development Ltd vs. Central Bank of Kenya & 2 Others) Civil Appeal No. 36 of 1996), the Court of Appeal made this point thus:

"There is not one case cited to show that an application in a   suit once decided by courts of competent jurisdiction can be  filed once again for rehearing. This shows only one intention on the part of the legislature in India and our Civil   Procedure Act. That is to say, there must be an end to applications of a similar nature; that is to say further, wider  principles of res judicata apply to applications within the suit. If that was not the intention we can imagine that the courts could and would be inundated by new applications filed after the original one was dismissed. There must be an end to interlocutory applications as much as there ought to be an   end to litigation..."

[14]There is another reason why the application is bound to fail, and it is this. The Applicant approached the Court under various provisionsof the law, including Section 10 of the Arbitration Act. However, as pointed out in my Ruling dated 30 June 2017, this Court can only intervene in the matter pursuant to Part VI of the Arbitration Act, for Section 10 of the Act is explicit that:

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

[15]  This is not an application for setting aside award under Section 35 of the Arbitration Act and therefore, it is easy to see that the application is fundamentally untenable. In Anne Mumbi Hinga vs. Victoria Njoki Gathara [2009] eKLR, the Court of Appeal expressed itself thus in a similar:

A careful look at all the provisions cited in the heading in the application and invoked by the appellant in the superior court clearly shows that, all the provisions including the Civil Procedure Act and rules do not apply to arbitral proceedings because Section 10 of the Arbitration Act makes the Arbitration  Act a complete code and rule 11 of the Arbitration Rules cannot override Section 10 of the Arbitration Act which states:

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

In the light of the above, the superior court did not have jurisdiction to intervene in any manner not specifically provided for in the Arbitration Act.  This includes entertaining  the application the subject matter of this appeal and all the other applications purporting to stay the award or the judgment/decree arising from the award.  In this regard we note that because of the number of the applications filed in the High Court outside the provisions of the Arbitration Act the award has not yet been enforced for a period close to 10 years now.  The provisions of the Arbitration Act make it clear that it is a complete code except as regards the enforcement of the award/decree where Arbitration Rules 1997 apply the Civil Procedure Rules where appropriate. In our view, Rule 11 of the Arbitration Rules 1997 has not imported the Civil Procedure Rules line, hook and sinker to regulate arbitrations under the Act.  It is clear to us that no application of the Civil Procedure Rules would be  regarded as appropriate if its effect would be to deny an award finality and speedy enforcement both of which are major objectives of arbitration.  It follows therefore all the provisions invoked except Section 35 and 37   do not apply or give jurisdiction to the superior court to intervene and all the applications filed against the award in   the superior court should have been struck out by the court suo  motu because jurisdiction is everything as so eloquently put in the case of Owners of the Motor Vessel “Lillian S” vs Caltex Oil(Kenya) Ltd1989 KLR 1. "

[16]In the light of the foregoing, it is my resultant finding that the Applicant's Notice of Motion dated 6 September 2017 is unmeritorious and the same is accordingly dismissed with an order that each party shall  bear own costs.

It is so ordered.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 3RD DAY OF NOVEMBER 2017

OLGA SEWE

JUDGE