Total Security Surveillance Ltd v Oil Field Movers Ltd [2022] KEHC 12375 (KLR)

Total Security Surveillance Ltd v Oil Field Movers Ltd (Civil Appeal E064 of 2022) [2022] KEHC 12375 (KLR) (Commercial and Tax) (20 June 2022) (Judgment)

Neutral citation: [2022] KEHC 12375 (KLR)

Republic of Kenya

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

Commercial and Tax

Civil Appeal E064 of 2022

DAS Majanja, J

June 20, 2022

Between

Total Security Surveillance Ltd

Appellant

and

Oil Field Movers Ltd

Respondent

(Being an appeal from the ruling and order of Hon D W Mburu, SPM dated May 6, 2022 in Milimani Magistrates Civil Case no E10088 of 2021))

Judgment

1. This appeal arises from a ruling and order where the trial magistrate allowed the respondent’s preliminary objection and struck out the suit.

2. Both parties agree that the service level agreement dated August 1, 2018 between them contains an arbitration clause which provides that all disputes arising out of and in connection with the agreement are to be resolved by a tribunal consisting of a single arbitrator.

3. The respondent filed a Notice of Preliminary Objection stating that, “The honourable court does not have jurisdiction to hear the dispute, parties having agreed vide clause 12 of the service level agreement dated August 1, 2018 to settle any and all disputes arising from the agreement through arbitration.”

4. After hearing the parties, the learned magistrate concluded that the jurisdiction of the court was ousted by the arbitration clause. The court relied on Paul Chemunda Nalyanya v I Messina Kenya Limited [2015] eKLR and Dock Workers Union Limited v Messina Kenya Limited[2019] eKLR in reaching the conclusion.

5. I have considered the parties’ arguments and I hold that the learned trial magistrate failed to consider the provisions of the Arbitration Act, 1995 which applies and regulates to matters of arbitration. The mere fact that an arbitration clause exists does not oust the jurisdiction of the court as a party who wishes to refer a matter filed in court to arbitration must comply with the conditions set out in section 6 of the Arbitration Act which provides as follows:6 (1) 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.

6. Under section 6(1)(a) and (b) of the Arbitration Act, once a party has brought the application for stay of proceedings promptly, the court may decline to refer a matter to arbitration only when the arbitration agreement is null and void, inoperative or incapable of being performed; or there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration (see Niazsons (K) Ltd v China Road & Bridge Corporation Kenya NRB CA Civil Appeal No. 157 of 2000 [2001] eKLR, Mt Kenya University v Step Up Holding (K) Ltd[2018] eKLR).

7. In addition, under rule 2 of the Arbitration Rules, 1997 a party invoking an arbitration clause must make an application in order for the court to satisfy itself that the matter deserves to be referred to arbitration. It is upon filing of the application that the court will consider whether to stay the suit by giving consideration to the factors set out in section 6 of the Arbitration Act. A preliminary objection denies the Court the opportunity to interrogate those factors as this is a factual inquiry that does not lend itself to disposition by a preliminary objection in line with the dicta in Mukisa Biscuit Manufacturing Company Limited v West End Distributors Limited [1969] EA 696.

8. Finally, section 10 of the Arbitration Act provides that the court can only intervene in matters of arbitration in accordance with the Act. The only way provided for a party to object to jurisdiction on account of an arbitration agreement is by filing an application for stay pending reference to arbitration under section 6; a preliminary objection is not provided for as a means to contest jurisdiction under the Arbitration Act.

9. Although the courts in Paul Chemunda Nalyanya v I. Messina Kenya Limitedi (supra) and Dock Workers Union Limited v Messina Kenya Limited (supra) proceeded to strike out the suit based on a preliminary objection, I hold that in both cases the court did not consider the import of sections 6 and 10 of the Arbitration Act.

10. For reasons I have set out, I allow the appeal and set aside the order of the subordinate court striking out the suit. The respondent shall pay costs of this appeal and of the subordinate court assessed at kes 30,000. 00.

DATED AND DELIVERED AT NAIROBI THIS 20TH DAY OF JUNE 2022. D S MAJANJAJUDGEMr Oira instructed by Nyaanga and Mugisha Advocates for the appellant.Mr Munyeri instructed by Kimani, Kiarie and Associates Advocates for the respondent.