1. Before the court for consideration is the Plaintiffs’ Originating Summons dated 4th October 2017 (“the Summons”). The Plaintiffs, as trustees of the Postal Corporation of Kenya Staff Retirement Benefits Scheme (“the Scheme’’), seek the following reliefs against the Defendant.
(1) That it be declared that the sum of Kshs 493,068,570.65 together with default interest of Kshs 47,413,844.10 is due and owing to the Postal Corporation or Kenya Staff Retirement Benefits Scheme from the Respondent as at August 2017.
(2) That it be ordered that the Respondent do pay the Postal Corporation of Kenya Staff Retirement Benefits Scheme Kshs 493,633,461.45 together with default interest of Kshs 47,413,844.10 due and owing as at 1st August 2017.
(3) That it be ordered that the Respondent do provide accounts as to the deductions made from the beneficiaries from June 2015 to date.
(4) That a mandatory injunction do issue compelling the Respondents to forthwith remit the monthly deductions from the Beneficiaries to the Postal Corporation of Kenya Staff Retirement Benefit Scheme.
(5) That the Respondents be condemned to provide the costs of the Summons.
2. The application is supported the affidavit of Dr Salim Ndemo sworn on 4th October 2017. The substance of the deposition is that under the Trust Deed dated 13th April 2010 establishing the Scheme, the Defendant covenanted to collect sums contributed by beneficiaries of the Scheme, who are its employees, and pay the same over to the Scheme. The Plaintiffs contend that the Respondent failed to honour its obligation under the Trust Deed by failing to remit the deductions from the beneficiaries to the Scheme. They aver as a result of the Defendant’s default, they are apprehensive that the Scheme may not be in a position to meet their obligations putting the lives of the beneficiaries in jeopardy. They further aver that the Scheme in general and the Trustees in particular are at the risk of being sanctioned by the Retirement Benefits Authority. The Plaintiffs aver that the Defendant has on several occasions admitted the outstanding debt and made promises to resolve it which promises have not been honored.
3. In opposition to the Summons, the Defendant filed a Notice of Preliminary Objection dated 8th December 2017. The Defendant objected to the suit on the ground that the subject of the suit between the Founder, the Defendant, and the Trustees, the Plaintiffs, is a dispute that ought to be determined by arbitration pursuant to Clause 35 of the Trust Deed hence the court lacks jurisdiction to entertain the suit and that it ought to be referred to arbitration.
4. On the substance of the suit, the Defendant’s case is that the suit has been filed prematurely as the parties were discussing and negotiating the matter with a view to resolving it. That the parties have held several discussions and agreed on an acceptable mode of settlement of the outstanding pension contributions through the transfer of two of the Defendant’s assets namely; Kizingo MSA / XXVI /194 and L.R. No. 209 / 12535 / Matumbato Nairobi whose transfer the Defendant’s Board of Directors, the parent Ministry as well as the Head of Public Service have approved. Following the approvals, the Defendant was asked to do a valuation of the two assets identified for transfer and forward the valuation reports to the National Treasury for concurrence and final approval. The Defendant avers that it has done the valuation of the two properties and forwarded the valuation reports to the parent ministry for onward transmission to the National Treasury for final approval before completing the transfer to the Scheme.
5. The Defendant denies that the process of transfer has been delayed as it had to follow the laid down procedures which it is not in control of. It urges that the Plaintiffs, having agreed to the proposed mode of settlement (through transfer of assets) cannot turn round move the court for judgment yet they were updated and were aware the process.
6. The Defendant further states that the Plaintiffs are aware of the its financial distress and its inability to settle the claim through a cash payment hence the reason the parties agreed on exchange of assets in settlement of the liability. It prays that the Plaintiffs’ case be dismissed and it be granted time to finalize and effect transfer of the two assets as agreed upon by the parties.
7. The parties filed written submissions in support of their respective positions. From the Summons, depositions and submissions, two issues fall for consideration. The first is the preliminary issue whether the suit ought to be struck out or in the alternative referred to arbitration. Second, whether the Plaintiff is entitled to the reliefs sought.
8. On the first issue of arbitration, the Defendant argues that in view of Clause 35 of the Trust Deed which provides that any dispute or difference between the founder of the scheme, in this case the Defendant, the Trustees, the members, the Dependants, Pensioners or their personal representatives in touching on the construction, meaning or effect of the Trust Deed or the rights and liabilities of any them in relation to the Scheme shall be referred to arbitration. It submits that in line with the Trust Deed, the court ought to decline jurisdiction and refer the matter to arbitration.
9. Although the court ought to give effect to the parties’ contractual obligations, the mere fact that an arbitration clause exists does not automatically 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.
10. 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).
11. The Defendant did file the application for stay but instead waived its right to do so by responding to the Summons and participating in the hearing and resolution of the matter. I therefore dismiss the ground that this court lacks jurisdiction as the Defendant waived its right to refer the matter to arbitration.
12. Turning to the substance of the claim, there is no dispute that Defendant is indebted to the Plaintiffs on account of unremitted deductions from the members of the Scheme. It admits as much. The issue of non-remittance of the dues has been outstanding and it is not in dispute that the parties engaged in negotiations to resolve the matter through transfer of assets. This is confirmed by a resolution of the Defendant’s Board of Directors dated 20th June 2017 and approval by the Cabinet Secretary, Ministry of Information, Communications and Technology in a letter dated 19th December 2017 addressed to the Head of the Public Service. In a letter dated 6th March 2018, the Principal Secretary intimated to the Defendant that it should go ahead to value the two properties subject of the settlement for onward transmission to the National Treasury. This process is in line with the National Treasury Guidelines on Asset and Liability Management in the Public Sector, 2020.
13. The Plaintiffs do not deny that liability for which it seeks judgment is already subject of a settlement. This is confirmed by the fact that the Plaintiffs filed an application dated 2nd March 2018 seeking, inter alia, an order that the Defendant, “be compelled to deposit the original titles for Title No. Kizingo Msa/XXXVI/194-Mombasa and LR No. 209/12535 – Upperhill in court.” This plea is based on the fact that the parties had entered into a settlement consummated by the exchange of assets. Since the parties had resolved the matter, I decline to order prayers 1 and 2 of the Summons. I however note that this matter has remained unresolved since it was filed six years ago, it is therefore in the interests of the justice for the Defendant to inform the court and the Plaintiff of the progress of implementation of the settlement.
14. As regards Prayers 3, the Defendant did not object to the prayer in principle. In any case, the Trustees, the Scheme, its members and beneficiaries are entitled to know the amount that has been deducted from the employees. The Defendant is therefore ordered to provide accounts of the deductions it has made from the beneficiaries from June 2015 to date since it is the Defendant’s obligation to remit monthly deductions from the beneficiaries to the Scheme.
15. For reasons I have set out above, I now made the following orders:
(a) Prayers 1 and 2 of the Originating Summons dated 31st December 2018 are dismissed.
(b) The Defendant is directed to file a progress report on the disposal of assets within 120 days from the date hereof.
(c) The Defendant is directed to furnish to the Plaintiffs, accounts of deductions made from the Beneficiaries of the Postal Corporation of Kenya Staff Retirement Benefits Scheme from June 2015 to date within 120 days from the date hereof.
(d) The Defendant pay the Plaintiffs’ costs of the suit assessed at Kshs. 100,000.00 only.
DATED and DELIVERED at NAIROBI this 27th day of JANUARY 2023.
D. S. MAJANJA
JUDGE
(1) That it be declared that the sum of Kshs 493,068,570.65 together with default interest of Kshs 47,413,844.10 is due and owing to the Postal Corporation or Kenya Staff Retirement Benefits Scheme from the Respondent as at August 2017.
(2) That it be ordered that the Respondent do pay the Postal Corporation of Kenya Staff Retirement Benefits Scheme Kshs 493,633,461.45 together with default interest of Kshs 47,413,844.10 due and owing as at 1st August 2017.
(3) That it be ordered that the Respondent do provide accounts as to the deductions made from the beneficiaries from June 2015 to date.
(4) That a mandatory injunction do issue compelling the Respondents to forthwith remit the monthly deductions from the Beneficiaries to the Postal Corporation of Kenya Staff Retirement Benefit Scheme.
(5) That the Respondents be condemned to provide the costs of the Summons.
2. The application is supported the affidavit of Dr Salim Ndemo sworn on 4th October 2017. The substance of the deposition is that under the Trust Deed dated 13th April 2010 establishing the Scheme, the Defendant covenanted to collect sums contributed by beneficiaries of the Scheme, who are its employees, and pay the same over to the Scheme. The Plaintiffs contend that the Respondent failed to honour its obligation under the Trust Deed by failing to remit the deductions from the beneficiaries to the Scheme. They aver as a result of the Defendant’s default, they are apprehensive that the Scheme may not be in a position to meet their obligations putting the lives of the beneficiaries in jeopardy. They further aver that the Scheme in general and the Trustees in particular are at the risk of being sanctioned by the Retirement Benefits Authority. The Plaintiffs aver that the Defendant has on several occasions admitted the outstanding debt and made promises to resolve it which promises have not been honored.
3. In opposition to the Summons, the Defendant filed a Notice of Preliminary Objection dated 8th December 2017. The Defendant objected to the suit on the ground that the subject of the suit between the Founder, the Defendant, and the Trustees, the Plaintiffs, is a dispute that ought to be determined by arbitration pursuant to Clause 35 of the Trust Deed hence the court lacks jurisdiction to entertain the suit and that it ought to be referred to arbitration.
4. On the substance of the suit, the Defendant’s case is that the suit has been filed prematurely as the parties were discussing and negotiating the matter with a view to resolving it. That the parties have held several discussions and agreed on an acceptable mode of settlement of the outstanding pension contributions through the transfer of two of the Defendant’s assets namely; Kizingo MSA / XXVI /194 and L.R. No. 209 / 12535 / Matumbato Nairobi whose transfer the Defendant’s Board of Directors, the parent Ministry as well as the Head of Public Service have approved. Following the approvals, the Defendant was asked to do a valuation of the two assets identified for transfer and forward the valuation reports to the National Treasury for concurrence and final approval. The Defendant avers that it has done the valuation of the two properties and forwarded the valuation reports to the parent ministry for onward transmission to the National Treasury for final approval before completing the transfer to the Scheme.
5. The Defendant denies that the process of transfer has been delayed as it had to follow the laid down procedures which it is not in control of. It urges that the Plaintiffs, having agreed to the proposed mode of settlement (through transfer of assets) cannot turn round move the court for judgment yet they were updated and were aware the process.
6. The Defendant further states that the Plaintiffs are aware of the its financial distress and its inability to settle the claim through a cash payment hence the reason the parties agreed on exchange of assets in settlement of the liability. It prays that the Plaintiffs’ case be dismissed and it be granted time to finalize and effect transfer of the two assets as agreed upon by the parties.
7. The parties filed written submissions in support of their respective positions. From the Summons, depositions and submissions, two issues fall for consideration. The first is the preliminary issue whether the suit ought to be struck out or in the alternative referred to arbitration. Second, whether the Plaintiff is entitled to the reliefs sought.
8. On the first issue of arbitration, the Defendant argues that in view of Clause 35 of the Trust Deed which provides that any dispute or difference between the founder of the scheme, in this case the Defendant, the Trustees, the members, the Dependants, Pensioners or their personal representatives in touching on the construction, meaning or effect of the Trust Deed or the rights and liabilities of any them in relation to the Scheme shall be referred to arbitration. It submits that in line with the Trust Deed, the court ought to decline jurisdiction and refer the matter to arbitration.
9. Although the court ought to give effect to the parties’ contractual obligations, the mere fact that an arbitration clause exists does not automatically 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.
10. 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).
11. The Defendant did file the application for stay but instead waived its right to do so by responding to the Summons and participating in the hearing and resolution of the matter. I therefore dismiss the ground that this court lacks jurisdiction as the Defendant waived its right to refer the matter to arbitration.
12. Turning to the substance of the claim, there is no dispute that Defendant is indebted to the Plaintiffs on account of unremitted deductions from the members of the Scheme. It admits as much. The issue of non-remittance of the dues has been outstanding and it is not in dispute that the parties engaged in negotiations to resolve the matter through transfer of assets. This is confirmed by a resolution of the Defendant’s Board of Directors dated 20th June 2017 and approval by the Cabinet Secretary, Ministry of Information, Communications and Technology in a letter dated 19th December 2017 addressed to the Head of the Public Service. In a letter dated 6th March 2018, the Principal Secretary intimated to the Defendant that it should go ahead to value the two properties subject of the settlement for onward transmission to the National Treasury. This process is in line with the National Treasury Guidelines on Asset and Liability Management in the Public Sector, 2020.
13. The Plaintiffs do not deny that liability for which it seeks judgment is already subject of a settlement. This is confirmed by the fact that the Plaintiffs filed an application dated 2nd March 2018 seeking, inter alia, an order that the Defendant, “be compelled to deposit the original titles for Title No. Kizingo Msa/XXXVI/194-Mombasa and LR No. 209/12535 – Upperhill in court.” This plea is based on the fact that the parties had entered into a settlement consummated by the exchange of assets. Since the parties had resolved the matter, I decline to order prayers 1 and 2 of the Summons. I however note that this matter has remained unresolved since it was filed six years ago, it is therefore in the interests of the justice for the Defendant to inform the court and the Plaintiff of the progress of implementation of the settlement.
14. As regards Prayers 3, the Defendant did not object to the prayer in principle. In any case, the Trustees, the Scheme, its members and beneficiaries are entitled to know the amount that has been deducted from the employees. The Defendant is therefore ordered to provide accounts of the deductions it has made from the beneficiaries from June 2015 to date since it is the Defendant’s obligation to remit monthly deductions from the beneficiaries to the Scheme.
15. For reasons I have set out above, I now made the following orders:
(a) Prayers 1 and 2 of the Originating Summons dated 31st December 2018 are dismissed.
(b) The Defendant is directed to file a progress report on the disposal of assets within 120 days from the date hereof.
(c) The Defendant is directed to furnish to the Plaintiffs, accounts of deductions made from the Beneficiaries of the Postal Corporation of Kenya Staff Retirement Benefits Scheme from June 2015 to date within 120 days from the date hereof.
(d) The Defendant pay the Plaintiffs’ costs of the suit assessed at Kshs. 100,000.00 only.
DATED and DELIVERED at NAIROBI this 27th day of JANUARY 2023.
D. S. MAJANJA
JUDGE