1. I have considered the Notice of Motion Application dated 27 November, 2022 together with the supporting affidavit sworn on even date and the replying affidavit sworn in opposition to the same dated 29 November, 2022 together with the rival submissions made by the parties and applicable law.
2. The applicant is seeking a stay of court proceedings pursuant to section 6 of the Arbitration Act.
3. The applicant submitted that the application was served on the Defendant, but no summons to enter appearance have been served on the Defendant. No memorandum of appearance has ever been filed by the Defendant. He contended that the reference to the same by the plaintiff/ respondent is therefore incorrect. Accordingly, the applicant submitted it has complied with section 6 of the Arbitration Act.
4. Counsel submitted that the parties have in good faith attempted mediation, but that the same did not succeed.
5. He submitted that the dispute between the parties is found at paragraph 6 of the applicant’s replying affidavit, relating to the certificate No. 6, which he submitted, may or may not be binding. That certificate, he argued is the subject matter of the dispute, which ought to be determined by the tribunal, and not this court.
6. Finally, he submitted that the parties are bound by the contractual procedure and ought to submit to the same to the arbitral tribunal. Any interim orders issued by this court should accordingly be discharged.
7. In opposition to the same, counsel for the respondent submitted that summons to enter appearance was duly served on the Defendant, and that the applicant has in fact, entered appearance in the matter.
8. He submitted that by a consent order, the claim was referred to mediation. By virtue of that consent, the present motion was compromised. He contended that alternate dispute mechanisms ought not to defeat a claim, or to hold the same in abeyance forever.
9. Further, he urged the court to accept that there is no actual dispute to refer to arbitration. He submitted that the claim has been admitted, and the only issue is the manner of payment relating to the same. No reference can take place on that issue alone.
10. I note the relevant law is as follows:
11. Section 6 of the Act provides as follows:
Stay of legal proceedings
(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.
12. Based on the above, it is evident that the only inquiry required of the court prior to granting a stay of court proceedings is to ensure the following: that the application has been taken as the first step in the legal proceedings, and the applicant has therefore not waived its right to continue with the arbitral process; that there is a valid arbitration agreement; and that there is a dispute which falls within the jurisdiction of the arbitral tribunal.
13. Further, the language in Section 6 of the Act is couched in mandatory terms, the implication being that unless there is non- compliance by the applicant with the same, this court is obliged to grant a stay of proceedings. This is in line with the decision of the High Court in Blue Line Limited vs Jaribu Credit Traders Limited [2008] eKLR.
14. As regards the first limb, I am satisfied that the applicant has not waived its right to arbitration because no substantive steps have been taken so far to acknowledge the court proceeding. To my mind entering appearance is not a substantive step. It is procedural. The question is whether any pleadings have been filed, and I am satisfied that no pleadings have been filed by the applicant in court in response to the plaintiff’s substantive claim. The court record speaks for itself in this regard.
15. With regard to the second limb, I am satisfied that the same has been met. There is a valid arbitration agreement. This is not in dispute, and the same is found at in the contract dated 3 April, 2019 at Clause 23.
16. As regards the next limb, whether there is any dispute between the parties with regard to the matters to be referred to arbitration? Based on the record before me, and at this interlocutory stage of the proceedings, I am hesitant to determine the issue of whether or not the entire debt is admitted, to do so may prejudice or embarrass further proceedings in this matter.
17. However, on the face of the record, it is evident that there is in fact a difference between the parties, not only on the issue relating to admission of debt, but also in relation to certificate No.6, and the question of whether or not the same is merely provisional, and subject to further contractual determination, or in fact, final.
18. Looking at the arbitration agreement, the language is deliberately broad terms, and reads as follows: “should any dispute or disagreement arise in relation to the supply of Services and/ Products by the Supplier and/or otherwise in terms of the Agreement, the parties shall refer the mater….” and then goes on to provide for the dispute resolution framework. I am of the view that based on the record before me, at this stage, the differences as stated above between the parties reasonably fall within terms of the agreement as stated above.
19. Further, I am of the view that the arbitral tribunal, once formed, and with the benefit of all the information before it, ought to have the liberty to draw its own conclusions relating to its jurisdiction, in the first instance.
20. In the event that I am wrong, little or no prejudice will have been occasioned by referring the matter to arbitration, and giving effect to the agreement. On the other hand, I am not inclined to re write contracts between parties, who have expressly chosen to resolve their disputes by way of arbitration, which I might add, is contractually binding on the parties to the agreement.
21. Based on the reasons set out above, I find that the test as set out above has been met and I find that the application is with merit. The orders of the court are as follows:
a. Proceedings before the court are hereby stayed in order to facilitate the arbitral proceedings.
b. The interim orders are discharged in order to allow the tribunal to make its determination on the relevant issues.
c. The Applicant shall have the costs of the application.
d. The file is accordingly marked as closed.