Smart Legal Limited v Marborough Energy Limited [2022] KEBPRT 718 (KLR)

Smart Legal Limited v Marborough Energy Limited (Tribunal Case E548 of 2021) [2022] KEBPRT 718 (KLR) (Civ) (8 July 2022) (Ruling)

Neutral citation: [2022] KEBPRT 718 (KLR)

Republic of Kenya

In the Business Premises Rent Tribunal

Civil

Tribunal Case E548 of 2021

Gakuhi Chege, Vice Chair

July 8, 2022

Between

Smart Legal Limited

Applicant

and

Marborough Energy Limited

Respondent

Ruling

1. By a reference dated September 30, 2021, the tenant applied under section 12(4) of Cap 301, Laws of Kenya for restraining orders against the landlord from terminating the lease dated April 23, 2021entered between them. It also sought for an order to vary the terms and conditions of the controlled tenancy so as to change the agreement from a profit share agreement to a rent agreement.

2. The tenant simultaneously filed a motion of even date seeking restraining orders in the same terms as the reference pending hearing of the reference. Interim orders were granted on October 4, 2021and the landlord was restrained from terminating the lease with the application being set down for hearing interpartes on October 21, 2021.

3. On October 15, 2021, the tenant filed a second application seeking inter-alia for an order to compel the landlord to allow it unconditional and unrestricted access to the suit premises being the piece of land known as Naivasha/Maraigashu block 20/17 pending hearing and determination of the application and reference. Interim ex-parte orders were given on October 18, 2021and the application was set down for hearing on October 21, 2021.

4. On October 21, 2021, the matter came up for hearing when both parties were represented by counsel. The respondent’s counsel, a Mr Gathara sought for three (3) days to file a response and the same was granted with corresponding leave to the applicant to file further affidavit within three (3) days if need be. The parties were directed to file submissions within 7 days after exchanging their filed affidavits and the matter was therefore set down for mention on November 15, 2021.

5. On November 15, 2021, only the applicant’s counsel appeared and the tribunal directed upon application that the interim orders be extended with a rider that no rebranding of the premises shall be done by the landlord in the pendency of the two applications. The matter was therefore set down for mention on January 3, 2022.

6. On January 3, 2022, only the tenant/applicant appeared in court and the matter was stood over to February 3, 2022.

7. On February 3, 2022, only the tenant/applicant appeared and confirmed having filed submissions and served the landlord’s counsel. The matter was rescheduled for mention on February 17, 2022. Again on February 17, 2022, the tenant appeared and sought for 90 days to regularize the lease issue with the landlord. The matter was therefore put off for mention on May 24, 2022.

8. Earlier on October 28, 2021, a replying affidavit sworn by Victoria Nyambura Karugu on October 27, 2022was uploaded on the e-filing portal of the judiciary by the firm of Aoko Gathara & Co Advocates acting for the landlord in response to the application dated September 30, 2021. The said affidavit at paragraph 9 states that the agreement entered into between the parties herein have an arbitration clause which the applicant insisted inclusion of and that no arbitration proceedings had taken place.

9. On May 4, 2022, the landlord filed its application dated April 26, 2022under certificate of urgency seeking for stay of the instant proceedings and setting aside of the orders of September 30, 2021, October 19, 2021and October 21, 2021. It also seeks for striking out of the reference with costs for want of jurisdiction.

10. The application is supported by the affidavit of Victoria Nyambura Karugu sworn on April 26, 2022and the grounds on the face of the application.

11. The principal ground upon which the application is predicated upon is that the lease agreement entered into by the two parties herein contains an arbitration clause No 25 which provides as follows:-“Any dispute connected with the formation, performance and interpretation of thus lease or arising therefrom or related thereto in any manner whatsoever shall be referred to the chief executive officers of the parties to be resolved within 15 days otherwise, it will be referred to arbitration by the chartered institute of Arbitrators Kenya Chapter (Arbitration Centre). Each party shall appoint one (1) arbitrator and the two (2) arbitrators this appointed will appoint a third (3rd) arbitrator who will act as the secretary general of the Arbitration Board. In the event one (1) of the parties has not appointed its arbitrator or if the two (2) arbitrators are unable to agree on a third (3rd arbitrator) within thirty (30) days after they have been appointed, the necessary appointments will be made in accordance with the arbitration law”.

12. The landlord in reliance on a letter dated August 4, 2021 by the tenant’s advocates, deposes that the tenant after receiving the termination notice sought to refer the dispute for arbitration under clause 25. 1 of the lease agreement. The letter is marked ‘VNK3’. It is thus not clear why it changed mind and came to this tribunal for determination of the dispute.

13. The issue of the tribunal’s jurisdiction according to the landlord was raised in the replying affidavit marked ‘VNK4’ sworn on October 27, 2021. Despite following its previous lawyer on the progress of the matter in regard to the objection on jurisdiction, no information was forthcoming and it had to appoint its current advocates who filed the instant application.

14. According to the landlord, its former advocates were indolent and unprofessional in their conduct as they did not properly effect its instructions to challenge the tribunal’s jurisdiction to hear and determine the matter and failed to attend before court to represent the interest of the landlord.

15. It is therefore the landlord’s plea that mistakes of its previous advocates should not be visited upon it and the issue of jurisdiction ought to be addressed herein as it was fundamental to the proceedings. It is deposed that this tribunal cannot rewrite what was agreed upon by the parties as the validity of the lease was not in dispute.

16. The landlord urges that the tribunal under article 159(2) of the Constitution, order 46 rule 20(1) of the Civil Procedure Rules, 2010 and sections 1A and 1B of the Civil Procedure Act is enjoined to promote alternative dispute resolution mechanism for purposes of attainment of justice.

17. The tenant in response to the application dated April 26, 2022 filed a notice of preliminary objection dated April 26, 2022 on the following three (3) grounds:-(i)The landlord has entered appearance in this matter and participated in these proceedings and therefore this honourable tribunal has jurisdiction to entertain the reference pursuant to section 6(1) of the Arbitration Act.(ii)Pursuant to section 6(1) of the Arbitration Act and by virtue of the landlord’s participation in the proceedings herein, the respondent is estopped from denying the jurisdiction of this tribunal.(iii)The application is incurably defective and an abuse of the court process and should be dismissed with costs.

18. The application and preliminary objection was directed to be canvassed by way of written submissions. Both parties complied and I shall advert to the submissions while dealing with the issues for determination.

19. Going by the pleadings above, I am called upon to determine the following issues:-(a)Whether this tribunal has jurisdiction to hear and determine the reference and the pending applications filed by the tenant.(b)Who is liable to pay costs?

20. In the case of Owners of the Motor Vessel Lillian “S” v Caltex Oil (Kenya) Ltd (1989) eKLR, the court of appeal while addressing the question of jurisdiction at page 8-9/27 stated as follows:“I think it is reasonably plain that a question of jurisdiction ought to be raised at the earnest opportunity and the court seized of the matter is then obliged to decide the issue right away on the material before it. Jurisdiction is everything, without it, a court has no power to make one more step. Where a court has no jurisdiction there could be no basis for continuation of proceedings pending other evidence”.The tenant’s counsel in support of its preliminary objection that the landlord ought to have raised the issue of jurisdiction at the point of entering appearance cited the provisions of section 6(1) of the Arbitration Act which stipulates as follows:-“A court before which proceedings are brought in a matter which is the subject to an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or otherwise acknowledges the claim against which the stay of proceedings is sought, stay the proceedings and refer the parties to arbitration unless it finds:-(a)that the arbitration agreement is null and void, inoperative or incapable of being performed or(b)That there is not infact any dispute between the parties with regard to the matters agreed to be referred to arbitration”.

21. The tenant submits that the landlord acknowledged the proceedings and responded through its advocates during the pendency of its applications. As such the issue of jurisdiction cannot be raised at this stage as the landlord failed to apply for stay of proceedings when the tenant was making its applications.

22. In response to the submissions, the landlord submits that the lease agreement contains an arbitration clause which ousts the tribunal’s jurisdiction and that it is trite law that a court of law cannot re-write a contract between parties and that parties are bound by the terms of their contract unless fraud, coercion or undue influence are pleaded. The lease agreement is not in dispute in this matter.

23. However in complete disregard of the said agreement, the tenant brought this matter before the tribunal. According to the landlord, the replying affidavit filed in this matter by its previous advocates does not amount to a step taken in the proceedings as it was in response to an interlocutory application and should not be considered as a consent and/or submission to jurisdiction in line with the decision in Standard Group PLC v Wesley Kiptoo Yegon &another (2019) eKLR where it was held as follows:-“However, it suffices to note that, generally an action to resist interim injunction is not a step in proceedings. Applications for interim injunction order are interlocutory proceedings (see the Court of Appeal of England and decision in Patel v Patel (1998) 3WLR. Therefore, the filing of the replying affidavit to the application for injunction order will not be deemed to be an acknowledgement of the court’s jurisdiction”.

24. The replying affidavit raised the issue of jurisdiction of this tribunal at paragraphs 23 and 24. The advocate then acting for the landlord only appeared once and by then had not filed any pleadings in this matter.

25. The tenant relies on the decisions of the court of appeal in Corporate Insurance Company v Wachira (1995-98) IEA 20 and MT Kenya University v Step up Holding (k) Ltd Civil appeal No 186 of 2013 where it was held that a party who wishes to take advantage of the arbitration clause in a contract should either at the time of entering appearance or before the entry of appearance make the application for reference to arbitration and ought not to take any further procedural steps in the matter.

26. In the case of corporate insurance company(supra), the appellant instead of applying for stay of proceedings filed a defence to the respondent’s claim raising the issue as a defence. The appellant made no application for stay of proceedings. This makes the facts of the case distinguishable from the present one as no defence has been filed to the reference in the instant case.

27. In my considered view, the landlord did not at any time concede to the jurisdiction of this tribunal. It is trite law that parties cannot confer jurisdiction to a court where there is none. In the case of Adero & Another v Ulinzi Sacco Society Limited (2002) I KLR 577, it was held as follows:-(1)……………………(2)The jurisdiction either exists or does not ab initio……….(3)Jurisdiction cannot be conferred by the consent of the parties or be assumed on the grounds that parties have acquiesced in actions which presume the existence of such jurisdiction.(4)Jurisdiction is such an important matter that it can be raised at any stage of the proceedings even on appeal”.

28. The parties herein choose the forum they wanted to appear before in the event of a dispute arising. There is no contest that a dispute arose in the process of executing the lease agreement. Instead of the tenant applying for arbitration, it rushed to this tribunal. It is my considered view that entertaining the dispute would amount to re-writing the contract for the two parties. 29. In the case ofJiwaji &others v Jiwaji &another (1968) EA 547 at page 554 it was held as follows:But where there is no ambiquity in an agreement, it must be construed according to the clear words actually used by the parties, and it would be quite wrong to adopt a different construction or to imply a term to the contrary effect”.

30. Citing Lord Halsbury L C in Smith v Coke (1891) AC at p 299 in the said case, the court went on to hold:-I must say, I for one have always protested against endeavouring to construe on instrument contrary to what the words of the instrument itself convey by some sort of preconceived idea of what the parties would or might have intended when they begun to frame their instrument”.“I think, I am not entitled to put into the instrument something which I do not find there in order to satisfy an intention which is only reasonable if I presume what their intentions were. I must find out their intentions by the instrument they have executed and if I cannot find a suggested intention by the terms of the instrument which they have executed, I must assume that their intentions were only such as their deed discloses”

31. The question of validity of the replying affidavit filed by the tenant is neither here nor there since I do not find any prejudice suffered by the landlord by reason of its filing without leave. I hold that it is properly on record.

32. As to whether this tribunal has jurisdiction to issue the orders sought by the tenant, I find that no such power exists in view of the provisions of section 7 of the Arbitration Act, 1995 which provides as follows:-7(1)It is not incompatible with an arbitration agreement for a party to request from the High Court, before or during arbitral proceedings, an interim measure of protection and for the High Court to grant that measure.(2)Where a party applies to the High Court for an injunction or other interim order and the arbitral tribunal has already ruled on any matter relevant to the application, the High Court shall treat the ruling or any finding of fact made in the course of the ruling as conclusive for purposes of the application”.

33. It is therefore clear that the Arbitration Act only recognizes the High Court as the only port of call by parties who wish to engage outside the arbitration agreement and this tribunal has absolutely no jurisdiction to entertain any proceedings under the Act.

34. In the premises, the interim orders granted herein were made without jurisdiction and are candidates for discharge.

35. In regard to costs, the same are in the trial court’s discretion but always follow the event unless for good reasons otherwise ordered. I have no good reason to deny the respondent costs.

36. Flowing from the above analysis, the final orders that commend to me are:-(i)The application dated April 26, 2022by the landlord/respondent is allowed in terms of prayer (b) thereof and the instant proceedings are hereby stayed for want of jurisdiction.(ii)The orders given on September 30, 2021, October 19, 2021and October 21, 2021are hereby discharged/vacated for want of jurisdiction.iv.The reference and applications dated September 30, 2021 and October 15, 2021 are hereby struck out for want of jurisdiction.v.The tenant shall pay Kshs 50,000/- to the landlord as costs of the proceedings herein.It is so ordered.

RULING DATED, SIGNED AND DELIVERED VIRTUALLY THIS 8TH DAY OF JULY 2022. HON. GAKUHI CHEGEVICE CHAIRBUSINESS PREMISES RENT TRIBUNALRuling delivered in the presence ofMuturi holding brief for Miss Ndirangu for the TenantMiss Muthoni holding brief for Kimathi for the LandlordFurther order:I have seen the certificate of urgency application dated 1st July 2022 together with the affidavit in support and in view of the above ruling delivered today, the same is hereby marked as spent.HON. GAKUHI CHEGEVICE CHAIRBUSINESS PREMISES RENT TRIBUNAL8TH JULY 2022