IN THE HIGH COURT OF KENYA AT NAIROBI
MILIMANI LAW COURTS
COMMERCIAL AND TAX DIVISION
COMMERCIAL CASE NO. E441 OF 2023
ADMASS VENTURES LIMITED ……………………………..1ST PLAINTIFF
ERMIAS AYNEKULU BETEMARIAM…..…………………..2ND PLAINTIFF
KIDIST ADMASS AMBIE …………………………….............3RD PLAINTIFF
-VERSUS-
SAIF PROPERTIES LIMITED….………………....……….……DEFENDANT
RULING
1. This suit was initiated by the plaintiffs on 11th September, 2023 pursuant to a plaint of even date. A Notice of Motion was contemporaneously filed with the plaint. The application has been brought under Articles 48, 159(2)(c) and 165 of the Constitution of Kenya, 2010, Section 7 of the Arbitration Act, 1995, Rule 2 of the Arbitration Rules, 1997 and Order 46 of the Civil Procedure Rules, 2010.
2. The plaintiffs/applicants seek a temporary order of injunction pending the hearing and determination of the impending arbitration to restrain the defendant/respondent or anyone acting on its behalf from selling or offering for sale the properties known as Covo commercial space Nos. F1B, F129 and Shops No. 3, 4, 5, 6 and 7 all constructed along Gitanga Road and Othaya Road. The applicants also seek a temporary order of injunction pending the hearing of the impending arbitration against the respondent or any one acting on their behalf restraining them from directly or indirectly exercising the right of sale and purchase under the rescission clause (c)(b) of the various agreements for sale of the properties Covo commercial space Nos. F1B, F129 and Shops No. 3, 4, 5, 6, 7, F1C and F130 all constructed along Gitanga Road and Othaya Road. The applicants also seek the costs of the application.
3. The application is supported by the grounds on the face of it together with a supporting affidavit sworn by Kidist Admass Ambie on 11th September, 2023, in which he deposes that the applicants purchased commercial spaces and shops from the respondent vide various sale agreements and paid the full purchase price on diverse dates for Covo commercial shops F1B, F129 and shops Nos. 3, 4, 5, 6 and 7, which the respondent fully acknowledges.
4. He avers that the only shops that had a balance unpaid as at 28th March, 2023 were F1C and F130. He states that the respondent breached the terms of the contract by failing to hand over the properties at the completion period’s lapse, prompting the applicants to issue a 21-day completion notice. That the respondent’s decision to rescind the agreement is prejudicial to the applicants. He urged this Court to issue a temporary injunction to preserve the subject matter pending the appointment of an Arbitrator, and the hearing and determination of the arbitral proceedings.
5. In opposing the application, the defendant/respondent filed a replying affidavit sworn on 26th September, 2023 by Mohammed Abdikadir, a director of Saif Properties Limited. He contends that the instant application is frivolous, and an abuse of the Court process as the applicant has no basis for seeking the orders sought. He argues that the applicants failed to pay the monthly instalments for units 3, 4, 5, 6 and 7 as and when they fell due, and as a result, the applicants are in arrears of Kshs. 23,543,293.08, which occasioned the delay in completing the houses.
6. Further, he deposes that the applicants have failed to remedy the arrears for units 3, 4, 5, 6, 7, F129, F130, F1B, and F1C, and that a default notice was issued in respect to units F129, F130, F1B and F1C. That the failure to pay the outstanding amount saw the defendant issue the applicants with rescission notices for units 3, 4, 5, 6 and 7 and the respondent subsequently extended the units to a new purchaser. The respondent contends that the filing of the instant suit is an afterthought. It urges this Court to dismiss the application.
7. The parties’ respective Advocates filed written submissions to canvass the application. In submissions dated 4th October, 2023, Ms Kendi, learned Counsel for the applicants reiterated the averments in the plaint and the grounds in support of the application. She submitted that Section 7 of the Arbitration Act, 1995 and Rule 2 of the Arbitration Rules, 1997 affords the applicants the locus to bring the instant application seeking be granted an interim measure of protection pending arbitration.
8. It was further submitted that this Court is not being called upon to look into the merits of the case but it is being urged to aid the impending arbitral proceedings to ensure that no party would be prejudiced during the hearing of the dispute before the Arbitral Tribunal. Counsel relied on the case of Safaricom Limited v Ocean View Beach Hotel Ltd & 2 others [2010] eKLR, where the Court laid out the essentials to be considered by a Court before issuing interim measures of protection pending arbitration.
9. Counsel argued that the applicants have demonstrated that the subject matter of the arbitration is under threat and the assets are about to be wasted by the respondent who has invoked the default clause and rescission of the units. It was contended that the actions of the respondent will put arbitral proceedings in jeopardy.
10. The applicants urge this Court to find that the applicants have met the threshold for granting the orders being sought in the application.
11. Ms Asli, learned Counsel for the respondent filed written submissions dated 7th November, 2023. She submitted that the applicants have failed to meet the threshold of being granted interim orders as set out in the case of Safaricom Limited v Ocean View Beach Hotel Ltd & 2 others (supra).
12. The respondent’s Counsel contended that the existence of an arbitration agreement does not in itself warrant a grant of an interim injunction pending arbitration proceedings, as the Court has to consider all the factors.
13. It was also submitted that the agreement signed between the parties conferred rights of rescission of the agreements under clause (c)(b) where the respondent was to retain 10% of the purchase price after the property had been sold to a subsequent purchaser, and the balance ought to be remitted to the buyer who has defaulted.
14. Ms Asli contended that applicants cannot allege that the property is under threat since the units had been sold to third parties, and as such, the instant application has been overtaken by events and interim orders would be issued in vain. Counsel urged this Court to dismiss the application with costs.
ANALYSIS AND DETERMINATION.
15. I have considered the application by the applicants and the grounds thereof, the replying affidavit and the oral and written submissions made by Counsel for the parties. The only issue for determination is whether the applicants are deserving of the orders being sought.
16. The power of the Court to grant interim orders of protection is grounded in Section 7 of the Arbitration Act which provides as follows:
“(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 the purposes of the application”.
17. Ms Kendi submitted that the various agreements entered into by the parties provide that in case of any disputes, the same ought to be referred to arbitration. The applicants argued that the purpose of the instant application is to protect the various units purchased from the respondent, which it intends to dispose of.
18. On the other hand, Ms Asli argued that the applicants have failed to demonstrate all the thresholds required for granting interim orders pending arbitration proceedings. She submitted that the applicants defaulted in making payments for units 3, 4, 5, 6 and 7 which prompted the respondent to issue a rescission notice on the said units.
19. The threshold for granting interim orders of protection pending arbitration was well laid out in Safari Limited v Ocean View Beach Hotel Limited & 2 others (supra) as cited by the applicants, where the Court set out some of the factors that should be taken into account in determining whether or not to grant such interim measures of protection, namely:
a) The existence of an arbitration agreement;
b) Whether the subject matter of arbitration is under threat;
c) In the special circumstances, what is the appropriate measure of protection after an assessment of the merits of the application?; and
d) For what period must the measure be given especially if requested for before the commencement of the arbitration so as to avoid encroaching on the tribunal’s decision making power as intended by the parties?
20. The above position was reiterated in the case of Seven Twenty Investments Limited v Sandhoe Investment Kenya Limited [2013] eKLR, where the Court held the following-
“Perusal of section 7 of the Arbitration Act clearly shows that the issue of whether or not there is a dispute or whether or not there would be losses by either side would not be a factor for a court to take into consideration when deciding whether or not it should grant an order of interim measure of protection or injunction to safeguard the subject matter of the arbitral proceedings. All that a court would be interested in is whether or not there was a valid arbitration agreement and if indeed the subject matter of the arbitral proceedings was in danger of being wasted or dissipated so as to preserve the same pending the hearing and determination of the arbitral reference.”
21. From the above cited authority, the main issue for consideration by the Court before issuing an interim injunction is whether there was a valid arbitration agreement. Clause (T) of the various agreements provides that in case of any dispute, difference or question arising between the parties the same would be resolved through arbitration. The applicants have attempted to initiate the arbitral proceedings.
22. It is on the terms of the various agreements that the respondent rescinded the contract between it and the applicants. I am thus persuaded that the parties are bound by the terms of the said agreements. In National Bank of Kenya Ltd v Pipe Plastic Samkolit (K) Ltd & another [2000] eKLR 112, the Court held thus:
“A court of law cannot rewrite a contract between the parties. The parties are bound by the terms of their contract; unless coercion, fraud or undue influence are pleaded and proved…”
23. The applicants argued that the breach of the various sale agreements has been occasioned by the respondent for failing to hand over the units on the completion date, whereas the respondent on its part, blames the applicants for breach of the sale agreements for non-timely payments of the purchase price which fell into arrears. According to the respondent units 3, 4, 5, 6 and 7 which the applicants seek to preserve pending the arbitral proceedings have been sold to third parties and therefore any orders to be issued by the Court, will be issued in vain.
24. In my considered view, it is the work of the Arbitrator to decide which party is in breach of the various sale agreements. The applicants have demonstrated that the units are threatened as they have been sold to third parties despite allegedly making payment of the full purchase price. The respondent contends otherwise.
25. I am persuaded that it is imperative for this Court to issue a conservatory interim order of protection, to preserve the status quo of units F1B, F129, 3, 4, 5, 6 and 7 and prevent the same from being disposed of during the pendency of arbitral proceedings.
26. For the above reasons, I find the applicants’ Notice of Motion dated 11th September, 2023 is merited.
27. In the circumstances, I make the following orders-
(i) A temporary order of injunction is hereby issued pending the hearing and determination of the impending arbitration restraining the defendant/respondent or any one acting on its behalf from selling or offering for sale the properties known as Covo Commercial space nos. F1B, F129, and Shops No. 3, 4, 5, 6,7 all constructed along Gitanga Road and Othaya Road.
(ii) A temporary order of injunction is hereby issued pending the hearing of the impending arbitration against the defendant/ respondent or any one acting on their behalf restraining them from directly or indirectly exercising the right of sale and purchase under the rescission clause (c) (b) of the various agreements for sale of the properties Covo Commercial space Nos. F1B, F129, and Shops No. 3, 4, 5, 6, 7, F1C, and F130 all constructed along Gitanga Road and Othaya Road.
(iii) The applicants will have the costs of the application.
DATED, SIGNED and DELIVERED at NAIROBI on this 9th day of February, 2024. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Ms Khadija h/b for Ms Osman for the defendant/respondent
Mr. A. Barrack h/b for Ms Kendi Latoya for the plaintiffs/applicants
Ms B. Wokabi – Court Assistant.