Rabadia Enterprises Limited v Mayfair Insurance Company Limited [2022] KEHC 14470 (KLR)

Rabadia Enterprises Limited v Mayfair Insurance Company Limited (Civil Case E286 of 2020) [2022] KEHC 14470 (KLR) (Civ) (13 October 2022) (Ruling)

Neutral citation: [2022] KEHC 14470 (KLR)

Republic of Kenya

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

Civil

Civil Case E286 of 2020

WA Okwany, J

October 13, 2022

Between

Rabadia Enterprises Limited

Plaintiff

and

Mayfair Insurance Company Limited

Defendant

Ruling

1. The plaintiff herein, Rabadia Enterprises Limited, sued the defendant through the plaint dated July 27, 2020 seeking the following orders:-a.A declaration be and is hereby issued that the defendant contractually and legally bound to accept and settle the claim lodged by the plaintiff in respect of the theft and loss of motor vehicles o1/COMP/01/0800/4412/2017 and 01/COMP/01/0800/4591/2017 respectively.b.A declaration be and is hereby issued that Clause 9 of the policy documents dated January 13, 2017 and July 12, 2017 is unlawful and unconstitutional to the extent that it purports to limit the statutory limitation of time from six(6) years to 12 months and strike out the same.c.That court do assess the compensation payable to the plaintiff in respect of the loss of motor vehicle registration numbers KCK 987 and KCM 814 A.d.Interest on “C” above.e.Costs of the suit.

2. The plaintiff’s case was that on or about January 13, 2017, it applied for and was issued with insurance covers by the defendant for the following vehicles:- Policy No 01/COMP/01/0800/4412/2017

PARTICULARS OF THE VEHICLE

KCK 985L Tata Tipper valued at Kshs 7,300,000/-.

KCK 986L Tata Tipper valued at Kshs 7,300,000/-.

KCK 987L Tata Tipper valued at Kshs 7,300,000/-.

3. On or about July 12, 2017, the plaintiff applied for and was issued with an insurance cover by the defendant for the following vehicles:- Policy No 01/COMP/01/0800/4591/2017

Particulars Of The Vehicle

KCM 814A Tata Tipper valued at Kshs 7,000,000/-.

KCM 813A valued at Kshs 7,000,000/-.

4. On or about 26th and October 27, 2017, some of plaintiff’s vehicles were stolen from the plaintiff’s parking yard which theft was reported to the police and the defendant.

Particulars Of The Vehicle StolenKCC 271B Mitsubishi Canter valued at Kshs 2,000,000/- (insured by Chester Insurance)KCM 814 A Tata Tipper valued at Kshs 7,000,000/- ( insured by the defendant)KCK 987L Tata Tipper valued at Kshs 7,300,000/- ( insured by the defendant)KCM 813 A Tata Tipper valued at Kshs 7,000,000/- ( insured by the defendant) 5. The plaintiff avers that of the four vehicles, KCM 813A was recovered or found abandoned at Ngong Road with no fuel while the remaining three vehicles have never been recovered. The plaintiff lodged a claim for compensation in respect of the following vehicles insured by the defendant:-KCM 814 A Tata Tipper valued at Kshs 7,000,000/-.KCK 987L Tata Tipper valued at Kshs 7,300,000/-

6. Upon service with the plaint and Summons to Enter Appearance, the defendant filed a Memorandum of Appearance under Protest dated August 26, 2020.

7. Concurrently with the Memorandum of Appearance, under Protest, the defendant also filed the Notice of Preliminary Objection and application dated August 26, 2021 which is the subject of this ruling.

8. The defendant listed the following grounds in the Notice of Preliminary Objection;-1. The suit is bad in law and offends the mandatory provisions of Section 11 of the Civil Procedure Act, Cap 21 Laws of Kenya that provides that every suit shall be instituted in the court of the lowest grade competent to try it; the subject matter of the plaintiff’s suit is below Kshs 20,000,000/-.2. The suit is contractually time-bared as the Insurance Policies provide to wit any claims be brought before expiry of 12 months.3. This Honourable court and any court’s jurisdiction is ousted in view of the Arbitration Clause.

Application 9. The defendant seeks the following orders in the application dated August 26, 2021:-1. Spent.2. Spent.3. That this Honourable Court be pleased to refer the suit herein to arbitration as envisaged at Clause 9 of the Insurance Police Documents dated January 13, 2017 and July 12, 2017 which have given rise to the present suit.4. The costs of this application be provided for.

10. The application is supported by the affidavit of the defendant’s Legal Manager Ms Emma Mwangi and is premised on the grounds that :-1. On January 13, 2017, the plaintiff applied for, and the defendant granted an insurance policy in favour of the plaintiff; and executed that Policy Document No 01/COMP/01/0800/4412/2017 dated January 13, 2017. 2.On July 12, 2017, the plaintiff took out a comprehensive insurance police with the defendant and executed that Policy document No 01/COMP/01/0800/4591/2017 dated July 12, 2017. 3.That both parties herein bound themselves by the said Insurance Policies (hereinafter jointly referred to as ‘Insurance Policies’).4. Clause 9 of the said Insurance Policies provides for mechanisms of resolving disputes arising between the parties, and requires mediation or Arbitration.5. The plaintiff has knowingly filed the instant suit in ignorance of the Dispute Resolution Clause contained in the Insurance Policies and this Honourable Court must not cordon the abuse of the court process demonstrated by the plaintiff herein.6. The Insurance Policies and the said Disputes Resolution Clause remain to be operative, valid and is capable of being performed.7. The dispute between the parties as pleaded by the plaintiff relates to issues arising from the Insurance Policies.8. It is in the interest of just and expeditious resolution of this matter that this application be allowed as prayed and this suit be stayed pending Arbitration.

11. The plaintiff/Respondent opposed the application through the replying affidavit of its director.

12. Parties canvased the application by way of written submissions which I have considered. The main issue for determination is whether this suit should be referred to arbitration.

13. The applicant’s case was that the parties entered into insurance contracts which provided for mechanisms for resolving disputes.

14. The plaintiff, on the other hand, submitted that it filed the instant suit seeking, inter alia, a declaration that Clause 9 of the defendant’s Standard Policy Documents is unlawful and unconstitutional to the extent that it seeks to limit the plaintiff’s right to legal redress. According to the plaintiff, Clause 9 of the defendant’s Standard Policy Document is illegal as it purports to limit the time within which parties can refer the dispute to arbitration to 12 months as opposed to the 6 years limitation period provided for under the Limitation of Actions Act. For this argument the plaintiff cited the decision in Njogu & Company Advocates v National Bank of Kenya Limited where it was held:-“Since the appellant and the respondent had clearly agreed on the above provisions, it is evidence that they were both party to the agreement, it is evident that they were both party to an agreement that is illegal as the terms of the agreement contravened the law. In the case of Peter v Singh (2) 1987 KLR 585 the holding that a contract entered into by the parties that was contrary to the provision of Section 3(10 of the Ex-change Control Act Cap 113 was illegal ab initio and unenforceable.Jaikishan Dass Mull v Luchhiminarain Kanoria & Company where is was held;“ Now, there can be no doubt that if a contract is illegal and void an arbitration clause which is one if the terms thereof must also perish along with it…..”Lee v The Showmen’s Guild of Great Britain (1952) 2 QB 329 (C.A) quoted in (Niazsons K Ltd v China Road & Bridge Corporation Kenya (2001) e KLR:-“If parties should seek by agreement to take the law out of the hands of the court and put it into the hands of a private tribunal without any recourse at all to the courts in the case of error or law then the agreement is to that extend contrary to Public Policy and void.”

15. It was the plaintiffs case that since is has challenged the validity of the arbitration clause in this suit, it is only the court with the jurisdiction to hear and determine the legality of Clause 9 of the Policy document. I find that the facts of this case are distinguishable from the facts in the above decision.

16. Clause 9 of the Policy document provides as follows:-“Disputes between You and UsIf any dispute arises between you and us on any matter relating to this policy such dispute will be referred to:a.A single mediator to be agreed between you and us within thirty (30) days of the dispute arising and the mediation process to be finalized not later than thirty(30) days thereafter orb.A single arbitrator agreed between us, to be appointed within thirty (30) days of the dispute arising. If we cannot agree, either party will refer the dispute to the Chairman of the Chartered Institute of Arbitrators ( Kenya Branch) whose decision will be binding on you and us. The arbitral award will be final. If the dispute is not referred to the arbitration process within twelve (12) months we will assume you have abandoned the claim.”

17. Section 4(1) of the Limitation of Actions Act stipulates as follows:-4. Actions of contract and tort and other actions“(i) The following actions may not be brought after the end of six years from the dated on which the cause of action accrued.a.Actions founded on contract.”

18. It is trite that parties are bound by the terms of their contract.

19. In present case, I note that the parties herein agreed to refer any dispute arising between them to mediation and if not finalized within 30 days, to arbitration by an arbitrator appointed within 30 days of the dispute arising.

20. The parties herein entered into the agreement willingly and consciously. They voluntarily agreed to the timelines set for the settlement of the disputes between them and I find that there is nothing illegal in the set timelines.

21. It is trite that under the doctrine of Kompentenze – Kompentenze, the arbitrator is competent to rule on the issue of his own jurisdiction.

22. This court is enjoined by Article 159 (2) of the Constitution 2010 to promote alternative dispute resolution mechanisms such as mediation and arbitration which the respondent is keen on avoiding. The mediation that the respondent allegedly engaged in is not that envisioned on Clause 9. This is the reason this Honourable court is not seized with details of the alleged mediation. The respondent should not be allowed to forum shop.

23. Kenyan Courts consistently bind parties to contractual steps in dispute resolution. See the cases of Nanchang Foreign Engineering Company (K) Limited v Easy Properties Kenya Limited (2014) eKLR and Jatin Shantilal Malde & 9 Others v Transmara Investment Limited & 2 Others [2018].

24. This court(Justice Tuiyott) in the case of Jatin Shantilal Malde & 9 Others v Transmara Investment Limited & 2 Others [2018] e KLR held that:-“A party who ignores a step in a dispute Resolution process which has been freely agreed will not be allowed to take advantage of his/her misfeance to avoid an Arbitral Agreement. Having found that the matters in dispute herein are the subject of Arbitral Agreement, I further find that by commencing the petition before attempting the amicable solution, the petitioners overlooked that step and cannot rely on it to gain an advantage.”

25. This court should not allow respondent to ignore the contractual steps. A mere allegation that the arbitral agreement is illegal, unconstitutional and or void cannot be sufficient to oust an arbitration agreement.

26. It is my further finding that the plaintiffs cannot blow hot and cold on the provisions of the Insurance Policy that it signed with the defendant. It would appear that on one hand, the plaintiff seeks to enforce the terms of the policy and in the same breath, cherry picks Clause 7 of the Policy and claims that it is null and void.

27. One of the questions that the court has to grapple with is whether contractual time bar clauses are illegal. Courts have taken the position that contractual time bars are in line with the freedom to contract as they ensure that dispute(s) are dealt with swiftly. This allows for greater commercial certainty with parties able to deal and transact without the potential threat of unknown claims. (See the High Court decision in the case of West Mount Investments Limited v Tridev Builders Company Limited [2017] eKLR.)

28. It is clear that the parties herein intended to resolve any arising dispute by use of the alternative dispute resolution, in which case, this court should give effect to this desire as its primary task is to construe the contract and give effect to it. See the case of Pius Kimaiyo Langat v Co-operative Bank f Kenya Limited [2017] eKLR.

29. The Court of Appeal in the case of Pius Kimaiyo Langat v Co-operative Bank of Kenya Limited [2017] eKLR stated:-“We are alive to the hallowed legal maxim that it is not the business of courts to rewrite contracts between parties. They are bound by the terms of their contracts, unless coercion, fraud or undue influence are pleased and proved. SeeNational Bank of Kenya Ltd v Pipeplastic Samkolit(K) Ltd [2002] 2 EA 503. The primary task of the court is to construe the contract and any terms implied in it. See Megarry, J. in the case of Coco v A.N. Clark (Engineers) Ltd-[1969] PPC 41. ” [Emphasis ours].

30. In the present case, I note that the respondent did not plead fraud, duress or coercion prior to signing the Insurance Policy.Disposition

31. For the reasons I have stated in this ruling, I find that the application dated October 26, 2021 is merited and I therefore allow it as prayed. The costs of the application shall abide the outcome of the arbitration.

DATED, SIGNED AND DELIVERED VIRTUALLY AT NAIROBI THIS 13TH DAY OF OCTOBER 2022. W A OKWANYJUDGEIn the presence of: -Mr Ochwo for Plaintiff.Mr B Onyango for the Defendant.Court Assistant- Sylvia