Transmara Sugar Company Limited v Kibiego [2022] KEHC 13889 (KLR) | Arbitration Clauses | Esheria

Transmara Sugar Company Limited v Kibiego [2022] KEHC 13889 (KLR)

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Transmara Sugar Company Limited v Kibiego (Civil Appeal 72 of 2019) [2022] KEHC 13889 (KLR) (13 October 2022) (Judgment)

Neutral citation: [2022] KEHC 13889 (KLR)

Republic of Kenya

In the High Court at Migori

Civil Appeal 72 of 2019

RPV Wendoh, J

October 13, 2022

Between

Transmara Sugar Company Limited

Appellant

and

Kennedy Kaunda Kibiego

Respondent

(Being an appeal from the Ruling of Hon. R. Odenyo (SPM) dated and delivered on 29/5/2019 in Migori CMCC No. 671 of 2018 Kennedy K. Kibiego vs Transmara Sugar Company Limited)

Judgment

1. This is an appeal by Transmara Sugar Company Limited against the ruling of Hon R Odenyo (SPM) dated and delivered on May 29, 2019. The appellant is represented by the firm of Ongegu & Associates while the respondent is represented by the firm of Odingo & Co Advocates.

2. By a plaint dated July 10, 2018, the respondent (formerly the plaintiff) sued the appellant (formerly the defendant) for general damages for the three (3) cycles of cane, costs of the suit, interest and any other relief. The respondent pleaded that on August 8, 2011, he entered into a written agreement with the appellant to harvest and purchase the sugarcane existing on his farm, Plot No 1295 measuring 0. 3 hectares situated at Nyakembene Area, Boikanga sub - location. Nyakembene Location, Gucha South District within Kisii County.

3. The claim was premised on a breach of contract, appellant for failed to harvest the already existing sugarcane plant, the 1st and the 2nd ratoons and the respondent suffered damages. Further to the foregoing, it was pleaded that the respondent invited the appellant in vain to a committee to arbitrate the dispute and upon refusal, the respondent issued a demand notice which the appellant did not honour hence this suit.

4. The appellant entered appearance and simultaneously filed an application dated November 9,2018. The appellant’s application was supported by the affidavit of Rajesh Bhargava the Company Secretary of the appellant. The appellant urged the trial court to stay the proceedings before it pending the determination of the dispute through arbitration as provided in clauses 9. 1 to 9. 4 of the contract dated August 8, 2011. The appellant also asked the trial court to strike out the suit with costs.

5. The trial Magistrate delivered his ruling on the aforementioned application dated May 29, 2019. The trial court allowed the application and directed the appellant to constitute an arbitration committee within 90 days and refer the matter to arbitration; the findings (awards) of the arbitration committee to be filed in court without any undue delay and in default, the matter to be referred to court for hearing and eventual determination.

6. The ruling of the trial court precipitated the instant appeal dated June 20, 2019 on the following 5 grounds: -i.That the learned Magistrate erred in law and in fact in holding that the court has jurisdiction to hear and determine the dispute between the parties;ii.That the learned Magistrate erred in law and in fact by allowing the appellant’s application dated November 9, 2018 with a condition on how the arbitration proceedings would be carried out by allowing and/or granting the defendant 90 days to constitute an arbitration committee;iii.That the learned Magistrate erred in law and in fact by holding that the suit before the court is properly so and declined to strike out the same;iv.The trial court erred in law and in fact by holding that the finding (award) of the arbitral committee be filed in court.v.The learned Magistrate erred in law and in fact by finding that the matters revert back to court or hearing and determination in default of any of the conditions set out by the court.

7. The appellant prayed: -i.That the appeal be allowed and the appellant’s notice of motion application dated November 9,2018 be allowed in its entirety without any conditions as to the arbitration proceedings.ii.That the respondent’s suit in Migori CMCC 671 of 2018 Kennedy K Kibiego v Transmara Sugar Company Limited be dismissed with costs to the appellantiii.That the lower court and/or any other court for that matter does not have jurisdiction to hear and determine the dispute between the parties herein by dint of paragraph 9 of the contract entered by the parties herein and sections 3, 4, 17, 20 and 29 of the Arbitration Act.iv.That the orders issued herein do also apply to Migori Chief Magistrates Court Civil Cases Nos. 672, 673, 674, 675, 675, 676, 677,678,679,680,683,684,685,686,687,689,691,685,696,707 and 710 of 2018 which ruling applied to the aforesaid cases.v.That the respondent does bear the costs of this appeal.

8. The appeal was canvassed by way of written submissions and both parties filed their respective submissions which I have duly considered.

9. I have carefully considered the pleadings, proceedings in the trial court, the ruling, grounds of appeal and the rival positions taken by both parties. I am of the view the following issues are for consideration: -i.Whether the trial Magistrate exceeded his jurisdiction?ii.Whether the ruling dated and delivered on May 29, 2019 was based on sound principles.

10. It is a common principle that this being the first appellate court, the court has a duty to re-evaluate and analyse all the evidence tendered in the lower court and arrive at its own conclusions but bearing in mind that it neither saw nor heard the witnesses testify. It has to establish whether the decision of the lower court was well founded. See the decision in Selle & Another v Associated Motor Boat Co Ltd (1968) EA 123.

11. On the first issue, the appellant submitted that the trial Magistrate exceeded his jurisdiction by staying the proceedings and at the same time stipulating that the parties revert back to the court for hearing in default of the conditions set out by the court. The appellant further submitted that where there is a valid arbitration clause, all issues falling within the jurisdiction of the arbitrator should be decided by the tribunal and the court should not intervene. On the other hand, the respondent submitted that clause 9. 1 of the agreement does not provide the mandatory words of referring the matters to arbitration. It was also submitted that the contract was entered into the year 2011 when the Sugar Act was in force and under Section 31 of the Sugar Act the Tribunal was gazetted and functional. The respondent asked the court to dismiss the appeal with costs as the lower court ordered that matters be referred to the tribunal.

12. I have considered Clauses 9. 1 - 9. 4 of the agreement dated August 8, 2011. It provides that any differences between the parties touching on the agreement shall be solved by an Arbitration Committee. In the event a party is not satisfied with the decision of the Arbitration Committee, then they may refer the dispute to the Sugar Dispute Tribunal established under the Sugar Act, 2001 whose decision is final.

13. The contention of the appellant is that although the trial Magistrate allowed the parties to proceed with the arbitration proceedings, it was not proper for the court to dictate that, in default of the same taking off, the court would to determine the case.

14. It is not in dispute that clauses 9. 1 - 9. 4 of the agreement provided for the dispute resolution process in the contract between the Respondent and appellant. Section 6 of the Arbitration Act provides for stay of proceedings as follows: -(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.(2)Proceedings before the court shall not be continued after an application under subsection (1) has been made and the matter remains undetermined.(3)If the court declines to stay legal proceedings, any provision of the arbitration agreement to the effect that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.

15. The crucial question is whether the magistrate’s court had jurisdiction to handle and determine the dispute between the appellant and respondent. It is not disputed that a contract existed between the parties in terms of paragraph 9. 1 and 9. 4 of the contract in the event of a dispute, the matter had to be referred to arbitration . The Respondent filed proceedings in the magistrate’s court seeking redress and the appellant filed the application the subject of this appeal. Section 6(1) of the Arbitration Act provides as follows:-A court before which proceedings are brought in a matter which is 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 satay 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; orb)that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.2)Proceedings before the court shall not be continued after an application under subsection (1) has been made and the matter remains undetermined.3)If the court declines to stay legal proceedings, any provisions of the arbitration agreement to the effect that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.

16. As held in the celebrated case of Owners of the Motoro Vessel “Lilian “S” v Caltex Oil (Kenya Ltd)where J Nyarangi said:-It is for that reason that a question of jurisdiction once raised by party or by a court on its own motion must be decided forthwith on the evidence before the court. It is immaterial whether the evidence is scanty or limited. Scanty or limited facts constitute the evidence before the court. A party who fails to question the jurisdiction of a court may not be heard to raise the issue after the matter is heard ad determined.

17. Jurisdiction is everything. Without it, a court has no powers 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 the moment it holds the opinion that it is without jurisdiction.”

18. A courts jurisdiction will ordinarily flow from the Constitution, Legislation or both. In Samuel Kamau Macharia & Another v Kenya Commercial BankApplication No 2 of 2011 (2012)EKLR, it was held:-A court’s jurisdiction flows from the Constitution or legislation or both. Thus a court of law can only exercise jurisdiction as conferred by the Constitution or other written law. It cannot arrogate to itself jurisdiction exceeding that which is conferred by law.

19. Section 6 of the Arbitration Act above, clearly sets out what the trial court should have done once the application to refer the matter to arbitration was made, that is stay the proceedings. This is because at the end of the Arbitration proceedings, an award would be filed in the court which if they did not agree then the matter would proceed to the Tribunal on Appeal as provided under paragraph 9 – 4 of the same contract. However, since the Sugar Arbitration Tribunal became defunct with the repeal of the Sugar Act, the court would still preserve the right of appeal by coming to this Court on Appeal, Pursuant to Section 39 of the Arbitration Act which provides:-(1)Where in the case of a domestic arbitration the parties have agreed that:-a)An application by any party may be made to a court to determine any question of law arising in the course of the arbitration; orb)An appeal by any party may be made to a court on any question of law arising out of the award. Such application or appeal as the case may be, may be made to the High Court.(2)On an application or appeal being made to it under subsection 1, the High Court shall:-a)determine the question of law arising;b)confirm, vary or set aside the arbitral award or remit the matter to the arbitral tribunal for reconsideration or where another tribunal has been appointed to that tribunal for consideration.

20. In the trial court in its ruling, granted ninety (90) days stay for the arbitration proceedings to proceed or it would proceed to hear the matter. Section 10 of the Arbitration Act provides that no court should intervene in a matter governed by the Act. The said principle was emphasized in the case of Wringles Company (East Africa) v Attorney General & 3 others (2013) eKLR where the court held that:-That courts cannot re-write what has already been agreed upon by the parties as set out in the agreement. The parties had agreed that in the case of a dispute arising as to the validity of the agreement, then the same would be subject to arbitration and the court cannot re-write the same.”

21. By granting stay of ninety (90) days, the trial court was clearly adding another term to the contract. The parties had to proceed with arbitration and if they disagreed, then they had a right of appeal and in absence of Appeal tribunal, proceed to the high court on appeal under Section 39 of the Arbitration Act.

22. I do agree with the appellant’s view that the court was interfering with the contract between the parties and inserted its own terms and arrogated itself jurisdiction in the matter, which it did not have.

23. In the case referred to by the appellants, Nyutu Agrovet Limited v Airtel Networks Limited (2015)eKLR the court acknowledged the constitutionality of the arbitration process and finality of arbitration clauses as regards how the parties to an agreement their disputes if any, resolved. The court said:-I also hold the view that Section 10 and 35 of the Arbitration Act must be interpreted within the context of the concept of finality as internationally recognized in arbitral proceedings conducted under the Unicitral model. They are not unconstitutional at all. Arbitration as a dispute resolution mechanism is not imposed on parties. They choose it freely when they incorporate the arbitration agreement into their contract, and at times even include the finality clause as was the case here. When they do so, they send the message that they do not wish to be subjected to the long, tedious, expensive and sometimes inconvenient journey that commercial litigation entails. That is what party autonomy, a concept that the courts treats with deference is all about. This court explained this issue clearly in Kenya Oil Company Ltd & Anor v Kenya Pipeline Company, Civil Appeal No. 102 of 2012 in the following terms;

24. The Arbitration Act, 1995 adopted the Model Law on International Commercial Arbitrations that was adopted in 1985 by the United Nations Commission on International Trade Law (UNITRAL). In addition to improving, simplifying and harmonizing practices in international commercial arbitration, the Act recognizes the principles of party autonomy and limits the role of the courts in commercial arbitration.

25. The principle of party autonomy underpinning arbitration is premised on the platform that provided it does not offend structures imposed by law, parties in a relationship have he right to choose their own means of resolving disputes without recourse to the courts or by limiting the circumstances under which recourse to the courts may be had.

26. When parties expressly exclude court intervention in their arbitration agreement, then they should honour it and embrace the consequences. They cannot turn round and claim that the very law they have freely chosen to govern their business is unconstitutional. That is what the respondent is trying to do here. I would like to reaffirm this Court’s decision in Anne Mumbi Hinga v Victoria Gathara, Civl Appeal No. 8 of 2009 where the Court emphatically stated as follows:-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 as previously agreed in advance by the parties and similarly 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.”

27. Having considered all the case law cited and refereed to above and all submission of counsel, this court is satisfied that the court overstepped its bounds and acted without jurisdiction. The trial court fell into error. The stay should not have been conditional. For the above reasons, I allow the appeal.

28. I make the following order;1)the appellant’s Notice of Motion dated November 9,2018 be allowed in its entirety without conditions as to the arbitration proceedings.2)The Respondent’s suit CMCC 671 of 2018 Kennedy Kaunda Kibiego v TransMara Sugar Co Ltd be and is hereby dismissed with costs to the appellant.3)The lower court and any other court lacks jurisdiction to hear and determine the dispute between the parties herein by din’t of paragraph 9 of the Contract entered into between the parties.4)The orders issued herein do apply to Migori CMCC 627, 673, 674, 625, 676, 677, 678, 679, 680, 683, 684, 685, 686, 687, 689, 691, 696, 707, 710, OF 2018. Costs of the lower court and appeal to the appellant.

DATED, DELIVERED AND SIGNED AT MIGORI THIS 13THDAY OF OCTOBER, 2022R. WENDOHJUDGEJudgment delivered in the presence of;Mr. Onsembe holding brief for Mr. Ongegu for the Appellant.Mr. Odingo for the Respondent.Nyauke Court Assistant.