Tabitha Nduta Nguru & Jacquelynn Paulynn Awino Ogwang v Ganza Limited, Valley Auctioneers & Eco Bank Limited [2021] KEELC 1794 (KLR)

REPUBLIC  OF KENYA

IN THE ENVIRONMENT AND LAND COURT AT THIKA

ELC CASE NO. 48 OF  2018

TABITHA NDUTA NGURU.............................................................................1ST PLAINTIFF

JACQUELYNN PAULYNN AWINO OGWANG............................................2ND PLAINTIFF

VERSUS

GANZA LIMITED........................................................................................1ST DEFENDANT

VALLEY AUCTIONEERS..........................................................................2ND DEFENDANT

ECO BANK LIMITED..............................................................................3RD DEFENDANT

RULING

The Plaintiffs/ Respondents filed the suit herein vide a Plaint dated 13th February 2018, seeking for Orders of Specific Performance, Permanent injunction and General Damages for breach of Contract and   concurrently filed an Application, dated 13th   February 2018, seeking interlocutory injunctive reliefs   stopping the imminent Statutory sale.

Before the Notice of Motion Application could be heard, the 1st Defendant/ Objector filed a Notice of Preliminary Objection on 3rd March 2020,and sought to have the entire suit dismissed on the following points of law;

1.  That Clause 17. 4 of the Agreement for sale dated 10th March   2014 and 6th May 2014, have an arbitral clause for resolution of disputes through Arbitration.

2.   That the  suit is therefore in contravention  of the Arbitration clause

3.  That parties are bound by Section 6 of the Arbitration Act, to resolve the dispute by way of Arbitration.

4.  That by dint of Arbitration clause in the agreements between the Plaintiffs and the 1st Defendant which forms the subject matter of the dispute between the parties this honorable Court lacks the requisite jurisdiction to entertain the Plaintiffs’ suit.

The Notice of Preliminary Objection was canvassed  with by way of Written Submissions and the 1st  Defendant/ Objector  through the Law firm of  Kitur & Company Advocatesfiled its written submissions dated  9th June 2021, and submitted  that the clear intentions of the parties  through Clause 17  of the Agreement was  that if any dispute arises,  they oust the jurisdiction of the Court and have  the dispute settled through Arbitration, which is in line with Article 159 (2) of the Constitution. That the parties are bound by Section 6 of the Arbitration Act and further that Section 10 of the Arbitration Act states that no Court shall intervene in a matter governed by the Act except as provided under the Act. The Objector relied on the case of   National Bank of Kenya Ltd….Vs…. Pipeplastic Samkolit ( K) Ltd & another  ( 2001) eKLR .

It was further submitted that the Court is seized with the obligation to give effect to the contractual terms agreed upon by the parties and therefore a constitutional obligation to refer the matter for Arbitration. It was further submitted that the matter has been placed before Court prematurely and the Court should honour the intentions of the parties and allow the parties to solve the dispute by Arbitration. They relied on various decided cases and submitted that the Preliminary Objection has merit and it is only just and equitable that the Court grants the orders sought.

The Plaintiffs/ Respondents filed their written submissions dated 6th April 2021, through the Law Firm of Kamamu, Lando  & Associates Advocates  and submitted  that the present Preliminary Objection has been  raised outside the  stipulated timelines as contemplated by Section 6  of the Arbitration Act and enunciated  in various decisions . The   Respondent relied on the case of Charles Njogu  Lofty….Vs… Bedovin  Enterprises Ltd ( 2005)  eklr where the Court held that;

“.. In my view Section 6(1) of the Arbitration Act, 1995 which (this) Court is construing means that any Application for stay of proceedings cannot be made after an Applicant has entered appearance or after the Applicant has filed pleadings or after the Applicant has taken any other steps in the proceedings so the latest permissible time for making an Application for stay of proceedings is the time that the Applicant enters appearance.

That further the Court of Appeal upheld this position in Mt. Kenya  University…Vs… Step Holding  ( K) Limited (2018) eKLRwhere the  Court of Appeal  reiterated that an Application seeking reference  to Arbitration  must be filed simultaneously  with the entry of appearance  with no procedural steps being taken  thereafter .

That the Courts have allowed for an objection to jurisdiction on the grounds of an existing Arbitration agreement not later than fourteen days after the objecting party has entered appearance. Further that in the case of Diocese of Marsabit Registered trustees ….Vs… Techocrade  Pavillion Ltd (2014) eKLR the Court held that filing  an Application  under Section 6 of the Arbitration Act   fourteen days after  filing the Memorandum of  Appearance was unreasonable. That the 1st Defendant/Objector has raised the Preliminary Objection as a delay tactic to slow the wheels of justice.

It was further submitted that there is no dispute capable of referral at the present stage as Section 6 contemplates Arbitration in the first  instance, unless  the Court satisfies itself that Arbitration  agreement is void, inoperative or incapable of being performed  and that  that  there is  not  in fact any  dispute between  the parties  with regard to ammeters agreed to be referred to Arbitration. . That the Rules of Procedure under  Section  6 (1) cannot  simply be wished away by Article 159 of the  Constitution. That the cause of action in this matter is pegged on a Sale Agreement executed in 2015, and the matter has been in Court since 2018 and the Preliminary Objection is a delay tactic.

It was further submitted that the Notice of Preliminary Objection is improper as Rule 2 of the Arbitration Rules 1997 states that Applications under Sections 6 and 7 of the Act shall be made by summons in the suit and therefore an Application for stay of proceedings under Section 6 (1)   should be made by way of a Notice of Motion. That there exists   no privity of Contract between the Plaintiffs and the 2nd & 3rd Defendants in relation to the Arbitration Agreement and therefore pursuant to the privity of contract, the dispute cannot be referred to Arbitration by the Court. It was thus the Plaintiff’s / Respondents submission that the Court is vested with jurisdiction to hear and determine the suit, as the Preliminary Objection has been filed outside the stipulated timeline.

The Court has carefully read and considered the   Written Submissions by the parties, the Preliminary Objection and the relevant provisions of law finds the issue for determination is whether the Notice of Preliminary Objection is merited.

Do the Grounds of Objections raised by the 1st Defendant/ Objectors  qualify  to be a Preliminary Objection as was described in the case of Mukisa Biscuit Manufacturing Co. Ltd …Vs… West End Distributors Ltd (1969) EA 696,where Law J A stated that;

“So far as I am aware, a Preliminary Objection consists of a point of law which has been pleaded or which arises by clear implication out of the pleadings and which objection point may dispose the suit”.

Further the Court stated;

“A preliminary objection raises a pure point to law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought   is the exercise of judicial discretion”.

The 1st Defendant/ Objector has raised various issues in his Objection that all culminate into calling the Jurisdiction of this Court into question. It is not in doubt that the issue of whether or not this Court has jurisdiction to entertain the matter   is a pure point of law and does not require the ascertaining of facts as Jurisdiction is everything and without Jurisdiction, the court has no option but to down its tools.  See the case of Owners of Motor Vessel ‘Lilian S’…Vs…Caltex Oil (Kenya) LTD (1989) 1 KLR, where the Court held that:-

“Jurisdiction is everything.  Without it, a court has no power to make one more step.  Where a court has no Jurisdiction, there would be no basis for a continuation of proceedings pending other evidence.  A court of law downs its tools in respect of the matter before it at the moment it holds the opinion that it is without Jurisdiction.”

Does the instant Notice of Preliminary Objection as raised by the 1st Defendants/ Objectors meets the test of what amounts to a Preliminary Objection as per the Mukisa Biscuits case (supra).The Court will then determine whether the Preliminary Objection on jurisdiction is merited.

The basis upon which the Preliminary Objection has been raised are the provisions ofsection 6(1) of the Arbitration Actwhich provides:

“A court before which proceedings are brought in  a  matter  which  is  the  subject  of  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 in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.”

It is not in doubt that the instant suit was filed on 16th February 2018.  On 16th April 2018, Mr. Kitur appeared for the 1st & 2nd Defendants and notified the Court that he just came on record and was granted leave to file a Replying Affidavit to the Plaintiffs Application that had been filed and further that the same would be canvassed by way of written submissions. Further on 31st July 2018, Mr. Kitur indicated to the Court that he would be filing his Written Submissions on behalf of the 1st Defendant/ Objector and on 11th December 2018,the Court gave directions that parties comply with Order 11of the Civil Procedure Rules and in subsequent Court appearances parties sought to settle the matter out of Court.

The 1st Defendant/ Objector has now moved the Court vide a Preliminary Objection dated     3rd March 2020 seeking to have the matter referred to Arbitration on the grounds that the Court lacks jurisdiction.

The Provisions of Section 6 (1) of the Arbitration Act are to the effect that if a party so wishes to apply for stay of proceedings, the party should apply not later than the time that the party enters appearance. This Notice of Preliminary Objection which does not even seek to stay the proceedings has been brought almost two years after the 1st Defendant/ Objector entered appearance   and also delivered a pleading to wit a Notice of Preliminary Objection and therefore the 1st defendant / objector    acknowledged the Plaintiffs claim and also the Court’s jurisdiction. See the case ofMt. Kenya University …Vs…Step Up Holdfing (K ) Ltd [2018] eKLR where the  Court  of Appeal held that;

“We have construed section 6of the Arbitration Act on our own and considered it in light of the case law highlighted above. We adopt the position taken by the Court in the above pronouncements as in our view; they represent a correct interpretation of the provision. Considering the above in light of the findings of the trial Judge, it is our finding that the trial Judge correctly exercised his discretion and properly appreciated both the facts and the law and arrived at the correct conclusion on the matter. We reiterate that in order to succeed, the law obligated the appellant to file the application seeking reference to arbitration simultaneously with the entry of appearance and thereafter take no further procedural steps in the matter.  The appellant herein entered appearance, and then responded to the respondent’s application for injunction before filing the application seeking an order for reference to arbitration. Critically the appellant’s response to the respondent’s application for injunction amounted to the taking of a procedural step in the matter before the initiation of the reference process.  We therefore find no error in the Judge’s findings. They are accordingly affirmed.”

The Upshot of the above therefore is that the Court finds that the Preliminary Objection dated 3rd March 2020 by the 1st Defendant/ Objector is not merited and the same is dismissed with costs to the Plaintiff/ Respondent.

It is so ordered.

DATED, SIGNED AND DELIVERED AT THIKA THIS 24TH DAY OF SEPTEMBER, 2021.

L. GACHERU

JUDGE

Court Assistant – …………………….