Nairobi City County v Kenya Commercial Bank Limited [2022] KEHC 73 (KLR)

Nairobi City County v Kenya Commercial Bank Limited (Miscellaneous Application E174 of 2021) [2022] KEHC 73 (KLR) (Commercial and Tax) (4 February 2022) (Ruling)

Neutral citation number: [2022] KEHC 73 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Miscellaneous Application E174 of 2021

EC Mwita, J

February 4, 2022

Between

Nairobi City County

Applicant

and

Kenya Commercial Bank Limited

Respondent

Ruling

1. The Applicant has filed a notice of motion dated 10th March 2021 brought under Article 159(2) (d) of the Constitution, section 35(2)(v) of the Arbitration Act and all enabling provisions of the law, seeking leave to file an Application to set aside the Final Arbitral Award dated 14th May 2020. The Applicant also seeks an order that the Arbitral Award dated 14th May 2020 be set aside in its entirety.

2. The Application is based on the grounds on the face of the Application, namely; that the Award was arrived at through a procedure not agreed by parties; that the Applicant was not afforded an opportunity to be heard regarding the statement of account provided to the Arbitrator, thus condemning it unheard; that delay in bringing the Application is not inordinate or contumelious but was inadvertent and was due to reorganization on its part. It also states that the Respondent will not suffer any prejudice if the Application is allowed.

3. The Application is also supported by an Affidavit of Eric Abwao, sworn on the 11th March 2021. It is deposed that the Respondent filed a claim for Kshs. 3,755,720, 733. 60 as at 9th March 2018 to which it filed a response and counter claim dated 20th May 2018. Advocates for the parties appointed the Sole Arbitrator and agreed on the terms of his appointment.

4. The Third Interim Award was issued on 12th November 2019, being a declaration that Kshs, 4,295,191,372 was due to the Respondent plus accrued interest which had fallen due. The Final Award was then issued on 14th May 2020 for costs of Kshs. 6,049,349

5. The Deponent states that he has reviewed the proceedings before Sole Arbitrator and noted that the Awards were arrived at through an arbitral procedure that had not been agreed upon by the parties. He points to an incident where the Arbitrator is said to have asked for a copy of outstanding balance showing the full debt after parties had closed their respective cases. The document was supplied long after the Applicant’s witness had testified and the document was not formally produced as an exhibit. This, he deposes, was not within the Arbitrator’s province to make out a case against the Respondent. The Applicant was thus not afforded an opportunity to be heard on that statement.

6. The Respondent has filed a replying affidavit by Mohamed Musa Mohamed. He deposes that the dispute arose between the parties and went for Arbitration. A Sole Arbitrator was appointed and he rendered the Third Interim Award on 12th November 2019, settling all issues between the parties. The Award was sent to the advocates for the parties on 17th December 2019. The Sole Arbitrator awarded the Respondent Kshs. 4,295,191,372. (Kshs. 6,000,000 interim payment of diminution of costs incurred by the respondent in enforcing its rights). A Final Award was subsequently delivered on 14th May 2020 for costs of Kshs. 6,049,349.

7. He deposes that the present Application is an abuse of the court process given that the Applicant did not comply with the law (section 35(3) to file an application to set aside the Arbitral Award within three (3) months.

8. Parties have filed written submissions reiterating their respective positions on this Application, and which the court has read and considered.

9. I have considered the Application, the response, submissions and the decisions relied on by parties. The core issue in this Application is whether the court should enlarge time within which to file an application to set aside the Final Award dated 14th May 2020. The reason the Applicant has given for seeking leave to apply to set aside that award, is that both the Third Interim Award and the Final Award were arrived at through an arbitral procedure that had not been agreed upon by the parties. In particular, the Applicant argues that the Sole Arbitrator was out of order when he asked for a copy statement of outstanding balance showing the full debt after parties had closed their respective cases. It has also been argued that the document was supplied long after its witness had testified and that the document was not formally produced as an exhibit. According to the Applicant, it was not afforded an opportunity to be heard on that statement.

10. Section 35 (2) provides grounds under which the Court may set aside an arbitral award, while sub section (3) sets the time line within which an application to set aside an award should be made. Subsection (3) states: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.

11. An application to set aside an award should be made three months after receipt of the award. The Applicant states that the Final Award was published on 14th May 2020. It did not file this Application to set aside the award until 10th March 2021 when it filed an Application for leave to apply to set aside that Final Award.

12. The Applicant does not argue that the Final Award was not delivered on 14th May 2020. It does not even argue that it was not aware of the publication of that Final Award. According to its submissions, the reason why it did not file an Application to set aside that Award was because of its internal reorganization. It argues that the delay is not inordinate and that the court has discretion to grant the orders sought.

13. The Respondent opposes the Application, arguing that the Award was published on 14th Mat 2020 and parties had notice of it, a fact the Applicant does not dispute.

14. As already alluded to, section 35(3) sets the timeline within which a party may apply to set aside an award. Although the section does not state that the court may enlarge time within which to file such an application, whether or not to extend time is a matter within the discretion of the court which must however be exercised judicially, taking into account the circumstances of each case.

15. The issue in this Application is whether the Applicant has justification for seeking enlargement of time to apply to set aside the Final Award dated 14th May 2020. Section 35(3) states that an application to set aside the award should be made not later than three months from the date of receipt of the award. The operative word here is from the “date of receipt.” The date of receipt is the date when the three months-time begins to run.

16. The Final Award having been delivered on 14th May 2020, the Applicant had three months from that date to apply to set it aside. It did not do that. The Application to enlarge time was made in March 2021 about ten months later. The Applicant argues that it was undergoing internal organization and that this delay is not inordinate. There is no good or plausible explanation why it took the Applicant so long to move the court for enlargement of time yet it was aware of the publication of the Final Award. I do not think the Applicant has shown justification for this court to exercise its discretion in its favour.

17. That is not all. The Sole Arbitrator made the Third Interim Award on 12th November 2019 and had it published on 17th December 2019, awarding the Respondent Kshs. 4,295,191,372. That was the core award in the dispute between the parties. The Third Interim Award has not been challenged which means the Applicant has no problem with it. The Final Award was on costs where the Sole Arbitrator awarded the Respondent Kshs. 6,049,349. It is this Final Award on costs that the Applicant wants to target should the court enlarge time as requested.

18. I have considered the Applicant’s grounds for seeking extension of time to apply to set aside the Final Award. I do not think the Applicant has made out a case for granting its request. The argument that the Sole Arbitrator was wrong in calling for a document after parties had closed their respective cases if accepted, will not aid it in its quest. This is because the Applicant has not challenged the Third Interim Award which was the Core determination by the Sole Arbitrator in the dispute between the parties. It has also not argued that the Respondent is not entitled to costs or what is wrong with the Final Award on costs. Even if the court was to allow this Application and enlarge time for challenging the Final Award, it is not clear how that would aid the Applicant in the final scheme of things.

19. In Nicholas Kiptoo Arap Salat v Independent Electoral and Boundaries Commission & 7 others [2014] eKLR, the Supreme Court stated that in making a decision whether or not to enlarge time, the party seeking extension of time must satisfy the court the basis for seeking the extension, and whether there is a reasonable explanation for the delay. The Court stated:Time is a crucial component in dispensation of justice, hence the maxim: Justice delayed is justice denied. It is a litigants’ legitimate expectation where they seek justice that the same will be dispensed timeously. Hence, the various constitutional and statutory provisions on time frames within which matters have to be heard and determined…A party may however, encounter some delay and the time within which he was to perform an act lapses….If one showed that he had a bona fide cause of action and time had lapsed, but was constrained to pursue within time that cause, because of some compelling reasons, the courts…could intervene and indulge such a person if established that he was not at fault.(Emphasis).Even on the basis of the above decision alone, the Applicant has not shown that it was not at fault, to persuade this court to act in its favour.

20. I am not persuaded that the Applicant has made a case for enlargement of time. This is because the Applicant has sought enlargement of time to file an application to set aside the Final Arbitral Award on costs dated 14th May 2020, when there is no challenge to the Third Interim Award which was the basis of the Final Award for costs. That being the view I take of the matter, it would be a wasteful exercise of judicial time and resources to grant this Application when the main award, the Third Interim Award, has not been challenged.

21. In the end, the conclusion I come to, is that the Application dated 10th March 2021 has no merit. It is declined and dismissed with costs.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 4THDAY OF FEBRUARY 2022EC MWITAJUDGE