Summit Cove Lines Co Limited v UAP Insurance Company Ltd [2019] KEHC 1742 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT MOMBASA

CIVIL SUIT NO. 43 OF 2017

SUMMIT COVE LINES CO. LIMITED.......................................PLAINTIFF

VERSUS

UAP INSURANCE COMPANY LTD.........................................DEFENDANT

R U L I N G

This Ruling is in respect of two Applications.

1. The first relates to a chamber summons application dated 29th January, 2019 where the Applicant is seeking for orders as here below reproduced;

(a) That the Arbitral award  made on 14th August, 2018 by Mr Mulwa Nduya be recognized as binding, be adopted and enforced as an order  of this court.

(b) That the Applicant be granted leave to enforce the Arbitral Award dated 14th  August, 2018 as the decree of this court.

(c) That costs of this application be provided for

(d) That the said Respondent be ordered to pay all costs and expenses incidental to the enforcement and execution of the decree aforesaid.

2. The  application is premised on the grounds on the  face of it and an affidavit dated 29th January 2019, sworn by  Joseph Kirema the, Managing Director for the  Claimant (herein “the  Applicant) where he deposes;

(a) that both parties appeared before the single Arbitrator and he made his award on the 14th August 2018 in which he directed the Defendant/Respondent  to pay the plaintiff/Applicant   Ksh  11,650,000/=

(b) Subsequently, he awarded was duly served as required by law and there has not been any application by the Defendant/Respondent under section 35 of the Arbitration Act or otherwise in challenge of the award made by the Arbitrator.

3. The Defendant/Applicant  in reply to the applicant  dated 29th January 2019 filed a replying  affidavit sworn on the 25th February, 2019 by Joseph Mwai its senior legal counsel where he deposes that;

(a) That  the Arbitrator made his award on the  14th  August, 2018 but failed  to disclose it till the 18th October 2018

(b) That upon reviewing the award he noted that the Arbitrator had made a fundamental error by finding there was no dispute between the parties as the  accident occurred on the 20th April,2011.

(c) That the Defendant avers that it instructed its previous advocate to file and application to set-aside the award immediately. Unfortunately, the advocate refused to take instructions and notified the Defendant in December.

(d) That  it was difficult to instruct an advocate  in December and more difficult since the Defendant’s previous advocate failed to provide the Respondent with  the Arbitral proceedings. It is advocate  on record  for the  Defendant that requested for  the proceedings and it yet to be furnished with all the documents by the Arbitrator

(e) that the Defendant avers that the Plaintiff’s application is premature since the time for filing an application to set aside has not lapsed. That the three months commencing on the 18th October, 2018 is exclusive of the period between 21st December and 13th January both days inclusive under the Civil Procedure Rules which are applicable to these arbitration proceedings.

(f) that the defendant avers that under section 37 (1) of the  Arbitration Act this court has power to decline to recognize and enforce the award if  it is contrary to public  policy and shall cause grave miscarriage of  justice.

4. The second application is the Defendant/Respondent application dated 4th February 2019 by which he Defendant prays for the following orders;

(a) The honorable court be pleased to  set aside  the  arbitral award dated 14th August 2018 for being inconsistent with public policy.

(b) That costs of the application be provided for

5. The application is premised on the grounds on the face of it and an affidavit dated 4th February  2019, sworn by Joseph Mwai, the senior Legal Officer of the defendant (herein “the Applicant). He  deposed that;

(a) The Respondent took out and insurance policy with the Applicant to cover a forklift registration number KAY 521 against accidental damage and on the 20th April, 2011 the Respondent notified the Applicant of an alleged accident that had caused damage to the forklift. Upon carrying out investigating, the Applicant  concluded that there was no accidental damage to the forklift and repudiated the insurance contract.

(b) The dispute was  referred to arbitration and  the hearing took place on the 19th January 2018 and 19th March 2018. On the 18th October 2018 delivered his arbitral award dated 6th August 2018 in which he made contradictory findings and held that there was no despite between the parties, that the accident involving the insured  forklift occurred on the 20th April 2011 and that all witnesses confirmed that the accident happened  on the aforementioned ate.

(c) That  the applicant  averred that the question of whether the accident occurred was an issue  in controversy and the same goes to the root of the award and by ignoring  the input of the Applicant’s  witnesses, the resultant  award failed to  adjudicate on the real dispute between the parties

(d) The Applicant avers  that failure by the arbitrator to adjudicate on the real  dispute before  him amounts to misconduct of  his part and a ground to set aside the arbitral award.

(e) The applicant avers that the law entitles them to file an application within three months of the notifications they were notified on the 18th October 2018 and as such the time to file an application to set aside an award shall lapse on the 11th February 2019. However, for purposes of computing time, the period between 21st December, 2018 shall be omitted from the computation period.

6. The Defendant/Applicant, in support of the Chamber Summons dated 4th February, 2019 submitted in reliance to Order 50 Rule 6 of the Civil Procedure Rules 2010 which grants courts power to enlarge time  as  justice my require, where limited time has  been fixed for doing  any act or taking any proceedings under the Civil Procedure Rules, by summary notice or by order of the court.

Order 50 Rule  6 CPR 2010 provides;

“power to enlarge time where  a limited time has been fixed for doing any act  or taking any proceedings under  these rules, or by summary notice or by order of the court, the court shall have power to enlarge such time upon such terms  (if any) as the justice of the case may require, and such enlargement may be ordered although the  application for the same is not made until after the expiration of the time appointed or allowed;

Provided that the costs of any application to extend such time and of any order made thereon shall be borne  by the parties making such application,   unless the court orders otherwise.”

7. In response to the Defendant/Applicant’s application, the Plaintiff/Respondent via a replying affidavit sworn on the 8th February 2019 by Mr Joseph Kirema  avers  that;

(a) The Defendant’s application is time barred since the same  has been filed after  expiry of three  months from the date of  service of the final award by the  Arbitrator which is in contravention of section 35 of the Arbitration Act.

(b)  The Plaintiff also avers that the  Arbitrator’s  award does not offend public policy  and the Defendant/Applicant has not stated that  public policy has been offended by the Arbitrator’s  award.

(c) The Plaintiff further avers that time started running immediately after publication of the award and at no time did it  stop running as alleged by the Defendant/Applicant and in any case  the law of stoppage of time is provided for under order 50 of the civil procedure rules and the same is not applicable in arbitral proceedings since the Arbitration Act  has the Arbitration Rules 1997.

(d) the  Plaintiff  then avers that the Defendant/Applicant is out to frustrate and  delay the Plaintiff form enjoying the fruits of its given award.

8. The hearing direction of the applications were given on 6th February 2018 and each party agreed to file written submissions on 26. 3.2019 each party, having filed written submission opted to  highlight on the same orally

ANALYSIS AND DETERMINATION.

9. I have considered the applications before me, the grounds of opposition and the affidavits filed in support in either I have also considered the submission by both  parties, the case law cited and the relevant law.

10. The applications for the enforcement of the Arbitral award and setting aside for the award dated 14th August, 2018 are related and can be determined together.

11. I could not  help but  notice  that the  Plaintiff, in its replying affidavit  sworn on the  8th February 2019 at paragraph 3 has raised the issue of being time bared. I am  of the view that the issue of limitation  of time   is a preliminary issue which ought to be determined before  this court embarks on the merits of  each party’s case. This is because, if the Defendant’s application is indeed time barred, then this court will automatically lack jurisdiction to entertain the defendant’s application.

13. Whether the court has jurisdiction to entertain an application for setting aside an Arbitral Award after the expiry of three months. There  is no disputation that the final award of Mr Mulwa Nduya, Arbitrator, was dated and published  on 14th August 2018 whereby it was then served upon the parties  on the 18th October 2018. Accordingly, granted are the strictures of section 35 (3) of the Arbitration Act where  the applicant only had up to 17th January, 2019 to challenge the award under section 35 of the Arbitration Act.

14. Section 10 of Arbitration Act 1995 sets out the courts jurisdiction where parties are Bound  by Arbitration clause as follows;

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

15. Section 35 (1) of the Arbitration Act sets out that recourse to the High court  against an Arbitral Award may only be made by an application for setting aside under subsection (2) and (3).

16. Section 35 (2) sets out the circumstances under which the High Court can set aside an arbitral award as;-

(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

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

17. Section 35 (3) further states that;

“An application for  setting aside the arbitral award may not be made after 3 months have elapsed form the date on which the party making that application  hadreceived 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”.

18. The Defendant’s application is dated 4th February and filed on the 5th February 2019 which is exactly 18 days after the lapse of 3 months.

In the case of Kenyatta International Conventional CenterKICC –vrs- Green-star systems limited (2018) e KLR OlgaSewe which relying on the Court of Appeal decision inANNE MUMBI HINGA VRS VICTORIA NJOKI GATHARA(2009) stated as follows;

“ …Thus, there  being no provision in the Arbitration Act  for extension of time, it is to be understood that strict compliance with the time line  set out in Section  35(3) of the Act is imperative and comports well with the principle of finality in Arbitration. Indeed in the  Anne Mumbi Hinga case, the Court of Appeal  proceeded to hold, in no uncertain terms, that Section 35 of the Arbitration Act bars any challenge even for a valid reason, after 3 months from the date of delivery of the award.”

19. The Applicant relied on Order 50 Rule 6 CPR 2010 that grants courts power to enlarge time.

20. In the case of ANNE MUMBI HINGA VRS VICTORIA NJOKI GATHARA(supra), the court of appeal stated;

“ 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 At 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”… Besides the issue of  jurisdiction as explained above, Section 35 of the Arbitration Act bars any challenge even for a valid  reason, after 3 months from the date of delivery of the  award….”

21.  Also in the case of Nyutu Agrovet Limited -vrs -Airtel Networks Limited ( 2015) e KLR it was held;

“Certainly, I do not agree that the Civil Procedure Act applies to arbitral proceedings, even as the issue has not been fully ventilated before us. However, much as  I am not ready to pronounce that the Arbitration Act is a complete code excluding any other  law applicable in civil  like litigation, I don’t see where the  Civil Procedure Act applies in this matter.

Rule 11 of the Arbitration Rules states; so far as appropriate the Civil Procedure Rules shall apply to all proceedings under these rules.  The subject, is only as far as it is appropriate Civil Procedure Rules shall apply to the Arbitration Rules not the Act. In any event a rule cannot override a substantive section of the Act- section 10 (Arbitration Act)”

22. Similarly, I am persuaded with the reasoning in the case of Mareco Limited vrs Mellech Engineering & Construction Limited (2019) e KLR where Muigai J held a follows;

“ In the instant case the court’s jurisdiction is ousted because these are not court proceedings but arbitration proceedings, where parties voluntarily choose to resolve disputes by arbitration. When parties expressly exclude court intervention in their Arbitration Agreement; the court will only intervene by virtue of section 10 and 35 of Arbitration Act 1995 in only specific instances/areas as are spelt out in the Act. Extension/Enlargement of time is not one of the stipulated instances”.

DISPOSITION.

23. Accordingly, it is my considered finding that the failure by the   Defendant /Applicant to comply Section 35(3) of the Arbitration Act is fatal to the Chamber Summons dated 4th February 2019. It is further evident from the Hinga case (Supra) that this court has no jurisdiction to entertain an application under Section 35 (3) of the Arbitration Act even for a  valid reason after expiry of  3 months  from the date of delivery of the award.

24. Therefore the application dated 4th February, 2019 be and is hereby dismissed with costs to the plaintiff.

25. The second issue for determination before this court is whether the application has made out a case for recognition and adoption of the final arbitral award as a court judgment?

26. The Arbitration Act confers the High Court with power to recognize and enforce domestic arbitral award a binding upon application by parties for such orders under the provisions of section 36 of the Arbitration Act, which provides;

(1) domestic arbitral award, shall be recognized as binding and, upon application in writing to the High Court, shall be enforced subject to this section and section 37

(2)…

(3) Unless the High Court otherwise orders, the party relying on an   arbitral award or applying for its enforcement must furnish

(a) the original arbitral award or a dully certified copy of it; and

(b) the original arbitration agreement or a duly certified copy of  it.

27. Section 37 of the Arbitration Act on the other hand provides for grounds upon which the High Court may decline to recognize and/or enforce and arbitral award at the request of the party against which it is  involved. The said section 37 (1) (a) and (b) provides;

“ (a) at the request of the party against whom it is invoked, if that party furnishes  the High Court  proof that;

(i) a party  to the arbitration  agreement was under some in capacity; 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, under the law  of the state where the arbitral award was made;

(iii) The party against whom the arbitral award is invoked 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 it contains decisions on matters beyond the scope of the reference to arbitration, provided that if the decision on matters referred  to arbitration can be  separated from those not so referred, that part  of the arbitral award which contains decisions on matters referred to arbitration may be recognized and enforced; or

(v) The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing any agreement by the parties ,was not in accordance with the law of the state where the arbitration took place; or

(vi) The  arbitral award has not yet become binding on the parties or  has  been set aside or suspended by a court of the state in which or under  the law of which, that  arbitral  award was made; or

(vii) The making of the arbitral awards was induced or affected  by fraud, bribery, corruption or undue influence;

(b) If  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 recognition or enforcement  of the arbitral award would be contrary to the public policy of Kenya.

29. In the case of vrs Tanzania National Roads Agency Kudan Sigh construction Limited  Misc. Civil  application No.171 of 2012 the court held interalia that:

“recognition and enforcement of  arbitral awards both  domestic and foreign is automatic under the provisions of section 36 of the  Arbitration Act. The conditions set under section 37 of the Act have not been met to warrant this court not to recognize enforce the   award.”

30. The finality of a decision from an Arbitral Tribunal was discussed in   this case of GATHARA ANN MUMBI HINGA VRS VICTORIA NJOKI

“We therefore  reiterate that there is no right for any court to intervene in the arbitral process, or in the  award except in the situations specifically set out in the Arbitration Act or a previously agreed in advance by theparties and simultaneously there is no right of appeal to the   High Court or the Court of Appeal against an  award  except in the circumstances set out in section 39  of the Arbitration Act.”

31. Also, the court of Appeal in the case of NYUTU AGROVET LTD VRS AIRTEL NETWORKS LTD ( 2015) eKLR;

“My view is that the principle on which arbitration is  founded, namely that the parties  agree on their own, to take disputes between or among them form the  courts for determination by a body put  forth themselves, and adding  to all that as in this case,   that the arbitrators  award shall be final, it can be taken that  as  long as the given award subsists it is theirs. But on the event it is  set aside as was the case here, that decision of the High Court  final remains their own, none of the parties can take steps to go  on appeal against the setting aside ruling. It is final  and the parties who so agreed must live with it unless, of course, they agree to go for fresh arbitration.”

32.  I have perused the court record and have found that the Plaintiff/Applicant has partly complied with condition asset out in section 36 of the Arbitration Act and has furnished  the court with the  original  final award dated 14th August, 2018 and but in the supporting affidavit the original arbitration agreement or a duly certified  copy of it as not be furnished by the Plaintiff/Applicant.

33. In the case of David Chabeda & another vrs Francis Ingasi (2007)eKLR the court rendered itself that failure to comply with the mandatory provisions of  section 36(3) of the Act, renders the application for recognition of an arbitral award in -curable defective. The same holding was upheld I the case National Oil Corporation of Kenya Ltd vrs Prisco Petroleum Network Ltd ( 2014) eKLR.

34. In the case of Structural Construction Company Limited vrs International Islamic Relief Organization High Court  Nairobi, Miscellaneous case No. 596 of 2005 it was held that a copy of the arbitration agreement annexed to the Applicant’s supporting affidavit is acceptable for purpose of enforcement of the award.

35. The bottom line in my considered opinion is that the original or a copy of the original arbitration agreement must be filed first before the award can be recognized as a judgment of the court.

36. I confirm that a copy of the arbitration agreement is filed in the Plaintiff’s list of document but the same was never annexed to itssupporting affidavit sworn on the 29th January 2019 and neither was it referred to or relied on. In the supporting affidavit, the plaintiff only avers that both parties agreed that the dispute be referred to arbitration this is contrary to the provision of section 36 (3).

That being the position in this matter, it follows that the Plaintiff’s application dated 29th January, 2019 is incompetent. I proceed to dismiss it with no orders a to costs

Orders accordingly.

Ruling dated signed and delivered at Mombasa this 7th day of May 2019.

LADY JUSTICE D. O. CHEPKWONY