REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL & TAX DIVISION
HCCOMM NO. E467 OF 2020
MASON SERVICES LIMITED &
QANTRA TECHNOLOGY LIMITED
(JOINT VENTURE)…………………………..…………....APPLICANTS
VERSUS
KENYA RAILWAYS CORPORATION ……………......RESPONDENT
RULING
1. On 5th May, 2023 the applicants filed a Notice of Motion dated 3rd May, 2023, brought under the provisions of Section 35 of the Arbitration Act, 1995 and Rule 7 of the Arbitration Rules, 1997, seeking the following orders-
(i) That the Honourable Court do set aside part of the Arbitral Award dated 27th day of April, 2023 and in particular set aside award (sic) in (a) and (b) of the Arbitral Award;
(ii) That the Honourable Court do vary the award by assessing the damages for breach of contract and/or loss of profits payable to the applicants and/or remit the matter back to the Arbitrator for assessment of damages for breach of contract/loss of profits; and
(iii) That the costs of the application be provided for.
2. The application is supported by an affidavit sworn on 3rd May, 2023 by Stephen Njoroge, a Director of the 1st applicant, Mason Services Ltd. The application was opposed by the respondent vide a replying affidavit sworn on 14th of June, 2023 by Christine Wahome, the Senior Legal Officer of the respondent.
3. The application was canvassed by way of written submissions. The applicants’ submissions were filed on 5th July, 2023 by the law firm of Oyugi & Company Advocates. The respondent’s submissions were filed on 5th August, 2023 by the law firm of Mwaniki Gachoka & Company Advocates.
4. In giving a background to the dispute that was before the Arbitrator, the applicants’ deponent stated that in the year 2019, the respondent placed a tender inviting the public to bid for installation and commissioning of an Integrated Parking Management System for the Standard Gauge Railway (SGR) passenger stations being TENDER NO. KRD /PLM / 00 5/Z0L8-2019 and the applicants won the competitive public tender. Counsel also stated that the applicants bid as a joint venture and were declared the winners after the entire process was concluded at a commisionary revenue sharing rate of 72.5% for the respondent and 27.5% for the applicants.
5. He further deposed that the successful bidder was expected to recover its financial investments during the period of the contract, which was three (3) years. He stated that the subject tender was divided into two (2) lots being LOT1 with a minimal annual guarantee of Kshs. 30,000,000/= and LOT2 with a minimal annual guarantee of Kshs. 20,000,000. That LOT-I comprised Mombasa Terminus and Voi Station and LOT-2 comprised Mtito-Andei Station and Nairobi Terminus.
6. The applicants averred that that the commencement period of the contract was set for I7th February, 2020 but it was later changed to 1st April, 2020, but due to the outbreak of the Covid-19 Pandemic, and that the Government of Kenya through the Ministry of Health suspended operations of the Madaraka Express Passenger Service with effect from the end of March to mid July 2020 when service resumed with reduced capacity.
7. The applicants contended that they were prevented from implementing the installation and commissioning due to the outbreak of the said Covid-19 Pandemic and its implications on movement and travels. The applicants also contended that the respondent was not co-operative from the outset of the project and frustrated the applicants in implementation of the project by delaying in replying to correspondences, handing over of the site, provision of office space and appointment of the Project Manager.
8. They averred that when the Madaraka Express resumed service although with reduced capacity, the applicants had almost finished the installation works at the Nairobi Terminus and had started collecting parking charges, and they had also started installation works at the Mombasa terminus but had not commenced work at the Voi and Mtito-Andei Stations as the said stations had not been handed over to the applicants.
9. They deposed that on 8th September 2020, the respondent wrote a letter to the applicants and expressed its dissatisfaction with the work done by the applicants and demanded immediate remedials despite the respondent's knowledge of the effect of the Covid-19 Pandemic, and on 28th September 2020, the applicants replied to the respondent's said letter and gave a detailed plan for completion of the remaining works in Nairobi, Mombasa, Voi and Mtito-Andei.
10. The applicants deposed that on 5th October, 2020, the respondent without prior notice and in total breach of the contract and the provisions of the law, terminated the contract on site by denying the applicants' workers entry to their places of work, and that the respondent failed, neglected and/or refused to respond to the applicants' letter of 5th October, 2020 which letter was demanding to know the cause of the termination. That the respondent failed, neglected and/or refused to respond to all subsequent communications sent by the applicants' Counsel until February 202I when it started to cooperate, and that since the contract made a provision for solving of disputes, with the last resort being arbitration, on 15th April 2021, the applicants filed an arbitration claim against the respondent dated 13th April, 2021.
11. The applicants claim that the Arbitrator misconducted himself by failing, neglecting, and/or refusing to deal with all the issues submitted by the applicants and in particular, issues Nos. (vi), (viii), (ix) and (x) found at pages (vii) and (viii) of the claim. They deposed that they tendered their evidence based on all the issues submitted to the Arbitrator for determination and he was obligated to deal with all the issues and his failure, neglect and/or refusal to deal with the same amounts to a procedural irregularity, hence a misconduct on the part of the Arbitrator.
12. The applicants further claim that the Arbitrator having made a finding of fact and law that the respondent was in breach of the contract without any just cause and his failure, neglect and/or refusal to award damages as compensation for the said breach and his failure to deal with it caused substantial injustice to the applicants. They reiterated that the contract was for sharing of revenue collected for three (3) years and they entered into the contract to make profits and employed substantial resources with a view to make profits within the said period. The applicants claim that the Arbitrator misconducted himself when he disallowed the claim for loss of projected profits for the period of three (3) years amounting to Kshs. 132,353,665.13.
13. That there was a professional report prepared by the applicants' witness No. 2, Dickson Omurunga Omusula, which ought to have guided the Arbitrator in arriving at a just and fair award on loss of projected profit since the contract was for revenue sharing and the Arbitrator was wrong in assuming that there was no revenue to be earned during the period. That the Arbitrator misconducted himself when he failed and/or refused to assess the damages and/or loss suffered by the applicants as a consequence of the respondent's breach of contract and in doing so, breached the provisions of Section 29(4) of the Arbitration Act, 1995 which required him to determine the dispute according to considerations of justice and fairness.
14. The applicants allege that the Arbitrator misconducted himself by disallowing part of special claim comprising more than Kshs. 6,000,000/= when there were sufficient materials in support of their claim vide valid receipts and invoices produced by the applicants in support of the equipment installed by the applicants, which equipment is in use for the benefit of the respondent to-date and yet the cost of the said equipment was disregarded by the Arbitrator.
15. The applicants averred that the Arbitral award was made contrary to the principles of equity recognized in Article 10(2)(b) of the Constitution of Kenya and consequently, part of the award is contrary to the public policy of Kenya. The applicants allege that the respondent breached the contract and has unjustly enriched itself since it continues using equipment installed by the applicants but the overall objective of arbitration which was to do justice to both parties involved in the arbitration will not be achieved at all, if part of the award is not set aside as it will result into substantial loss to the applicants.
16. In the replying affidavit, the respondent averred that the dispute between the applicants and the respondent was referred to arbitration for determination pursuant to the provisions of Clause 13 of the agreement dated 7th February, 2020, and that the parties vide a letter dated 9th March, 2021 settled for Mr. Patterson Kamara sitting as the sole Arbitrator to hear and determine the dispute and on hearing the dispute on various dates, he delivered an award on 27th April, 2023.
17. The respondent contended that the application fails to establish sufficient or justifiable grounds as required by Section 35 of the Arbitration Act, 1995 to warrant this Court to set aside the Arbitral Award dated 27th April, 2023. The respondent further contended that the instant application is an appeal disguised as an application to set aside the arbitral award as the applicants are seeking the Court to set aside the orders of the Arbitrator and replace them or vary them with the decision of this Court without any basis and that the application is challenging both the law and facts of the Arbitral Award, rather than a genuine application seeking to set it aside.
18. The respondent deposed that there is no valid ground for setting aside the Arbitral Award as the Arbitrator rightfully dismissed the bulk of the applicant’s claim comprising Kshs.14,771,793.00 being special damages and Kshs.132,783,655.13 being the loss of projected profits as there was no evidence to prove such claims, and noting that the claims were baseless, the Arbitrator rightfully dismissed the claims. It also deposed that the Arbitrator’s determination to the effect that the applicant did not provide sufficient evidence to prove its claims cannot be deemed as being against public interest as alleged, especially noting that the claims were special damage claims in nature.
19. That in regard to the special damage claim, although the Arbitrator found that the respondent had breached the subject contract, he found that most of the special damages’ claim and loss of projected profits not to have been proved adequately by way of sufficient evidence.
20. The respondent averred that in regard to the claim for Kshs.14,771,793.00, the Arbitrator found that the applicant had proved the sum of Kshs.8,353,546.00 as having been specifically proved by way of valid evidence such as by invoices and/or receipts.
21. That in regard to the claim for the sum of Kshs.132,783,655.13 being the loss of projected profits for three (3) years, the same arose from a report prepared by the applicants’ Accountant but the veracity and the authenticity of the aforementioned report were called to question and the report was inconsistent and unbelievable, and the Arbitral Tribunal found that the report was flawed in terms of its preparation and the unsupported assumptions made therein, leading to the projected figure of Kshs.132,783,655.13, as being the loss of revenue for three (3) years without failing the legal requirement for proving special damages with specificity. The respondent stated that the Arbitral Tribunal rightfully disregarded the claim for projected profits.
22. The respondent deposed that the Arbitrator dealt with all the issues raised by the parties when making his award thus the applicants’ allegations are baseless and false. The respondent contended that there were no procedural irregularities that were committed by the Arbitral Tribunal as alleged or at all, and that the said Tribunal considered all the relevant laws, regulations and legal principles.
23. The respondent concluded its depositions by contending that the instant application is another attempt by the applicants to re-litigate the aforementioned issues before this Court, which goes against the principle of finality of arbitral proceedings.
24. In their written submissions, Mr. Oyugi, the applicants’ Counsel contended that the Arbitrator failed to deal with issue Nos. vi, viii, ix and x as framed by them, which were crucial in determination of the claim, without offering any reason at all, thereby misconducting himself.
25. In regard to issue No. vi on whether the applicants suffered loss and damage due to termination of the contract, Counsel stated that the point in issue as framed was relevant and crucial in determining the dispute as the claimant had done substantial works and used their resources in doing the said work and that the respondent was not justified in terminating the contract and blaming the respondent for breach of contract.
26. In regard to issue No. viii as to whether if the applicants were not reinstated they could be compensated for expenditure and expenses incurred in implementing the contract, Mr. Oyugi stated that the above issue was not dealt with by the Arbitrator and that he never gave any reasons as to why he failed, neglected, and/or refused to determine the same. Counsel contended that the evidence by the respondent’s main witness and the finding made by the Arbitrator on the works done by the applicants in Nairobi and Mombasa justified the consideration of the said point in issue.
27. In regard to point No. x on whether general damages can be awarded to the applicants for breach of contract by the respondent, Mr. Oyugi submitted that the Arbitrator made findings of facts and law which blamed the respondent for breach of contract and he did not find any justification for breach of contract at all but he failed, neglected and refused to consider all the points in issue which were essential to the applicant’s claim. He contended that the default resulted in substantial miscarriage of justice to the applicants and that at the said omission amounts to a procedural irregularity. Counsel relied on opinion of the learned Authors of the treatise Russel on Arbitration at paragraph 8-094 at p. 494 on the issue of failure to deal with all the issues raised by the parties to the Arbitral agreement.
28. Counsel also relied on the case of Patrick Muturi v Kenindia Assurance Company Limited [2016] eKLR, where Judge F. Gikonyo set aside an Arbitral Award and remitted the matter to arbitration due to omission on the part of the Arbitrator to deal with an issue presented for determination. Counsel cited the Court of Appeal decision in Kukal Properties Development Ltd v Tafazzal H. Maloo & others [1993] eKLR, on the issue of omission to deal with an issue framed for determination.
29. The applicants’ Counsel contended that the Arbitrator failed to determine if general damages could be awarded for breach of contract by the respondent. He also contended that the Arbitrator failed to consider the provisions of the Arbitration Act, 1995, the Public Procurement and Disposal Act, 2015 and Article 10(2)(b) of the Constitution of Kenya, 2010.
30. In the applicants’ submissions, their Counsel stated that the Arbitral Award is incomplete by failure to consider all the issues that called for determination.
31. Counsel also stated that the Arbitrator overlooked and/or failed to consider and/or take proper account of the applicants’ evidence tendered in the dispute. He stated that the applicants submitted documents as exhibits but the Arbitrator disallowed the applicants’ loss of projected profits of Kshs.132,783,655.13 based on the report presented by the respondent’s 2nd witness, Mr. Dickson Omurunga Omusula, without taking into account that the contract was a revenue collection share from parking fees and the tender documents had projections based on its feasibility study and proposed parking tariffs. Counsel contended that the dismissal of the applicants’ claim on the said heading without finding an appropriate sum payable was wrong as the said witness would have said how much the applicants could have earned had the contract not been terminated. The applicants’ Counsel relied on the case of Evangelical Mission of Kenya and another v Kimani Gachuhi and another [2015] eKLR, where Ogolla J, pronounced himself on the applicability of Article 10 of the Constitution by Courts and Arbitrators in deciding disputes before them
32. Mr. Oyugi stated that the Arbitral Award is against the public policy of Kenya by disregarding known settled principles of law of contract such as no injury is without a remedy, and the principles of equity enshrined in Article 10(2)(b) of the Constitution. He contended that the Arbitrator also disregarded the provisions of the Public Procurement and Asset Disposal Act, 2015, under which the contract was entered.
33. It was submitted that the Arbitrator treated the breaches made by the respondent lightly and yet they were fundamental in shaping the future contractual relationship involving the respondent and third parties, and that he left the applicants empty handed, yet they had invested in equipment that is now in the custody of the respondent. It was also submitted that the Arbitrator left the respondent smiling having not been made to pay for its breaches.
34. Counsel argued that this is a classic case that goes against the public policy of Kenya as one party to the contract has been left to unjustly enrich itself at the expense of the other party. He cited the decision by Judge Ringera, (as he then was), in Christ for all Nations v Apollo Insurance Co. Ltd [2002] 2 EA.
35. Mr. Muturi, the respondent’s Counsel, in his written submissions stated that from the application, it is apparent that the applicants are seeking to set aside part of the Arbitral Award on the quantum of the damages awarded by the Arbitrator in addition to moving this Court to vary the award by assessing damages and/or loss of profits payable to the applicants, on the basis that the Arbitrator failed to deal with the issues put for determination, neglected, and refused to consider an award for damages payable to the applicants and that that he overlooked and failed to consider or take proper account of the evidence tendered before him.
36. Counsel contended that from the prayers in the application and the grounds therein, the instant application is a merit appeal against the Arbitral Award which is disguised as an application for setting aside the said Award under Section 35 of the Arbitration Act, as it is challenging the merits of the decision on both the application of facts and interpretation of the law by the Arbitrator. He stated that the application is vexatious and an abuse of the Court process.
37. He relied on the decision by the Supreme Court of Kenya in the case of Geo Chem Middle East v Kenya Bureau of Standards [2020] eKLR, and submitted that arbitration is meant to expeditiously resolve commercial and other disputes where parties have submitted themselves to that dispute resolution mechanism. Counsel further submitted that the role of Courts to interfere with arbitral processes and awards is greatly diminished notwithstanding the narrow window created by Sections 35 and 39 of the Act.
38. Mr. Muturi submitted that delving into a merited assessment of the Arbitral Award as requested herein will inevitably lead the High Court to assuming the mantle of an appellate body, which would unmistakably contravene Kenya's fervent public policy, loudly pronouncing the intention of bestowing finality upon Arbitral Awards and decisively discouraging the Court from embarking on appeals over the Arbitral Tribunal's decisions. Counsel referred to Section 10 of the Arbitration Act which specifically states that Courts shall not intervene in matters governed by the Arbitration Act unless as provided for in the said Act. He contended that as acknowledged by the Supreme Court in the Geo Chem case (supra), Courts do not have authority or powers to make assessments of the merits of the Arbitral Award when making its determination of an application to set aside an Arbitral Award under Section 35 of the Act, as the jurisdiction to set aside is only limited to the specific grounds
39. Mr. Muturi submitted that in dealing with an application seeking to set aside an Arbitral Award, the Court should not delve on re-evaluating the decision of the Arbitrator with a view of replacing or substituting the decision with its own decision. He cited the decision of the Court of Appeal, in the Synergy Industrial Credit Ltd v Cape Holdings Ltd [2020] eKLR, which underscored one of the fundamental attributes of the Arbitration Act that firmly upholds the principle of finality in arbitral proceedings and the principle of party autonomy. He stated that this hallmark feature endows parties with the prerogative to resolve their disputes with finality within the forum and method of their choosing.
40. Counsel submitted that the instances where the Court may intervene in arbitral proceedings or interfere with an Arbitral Award are expressly and restrictively circumscribed by the specific provisions enshrined within the Act. He cited a decision by Lady Justice Grace Nzioka in the case of Margaret Gacigi Gecaga v Udi Mareka Gecaga & another [2020] eKLR, where the Judge held that a party cannot challenge an award on the basis that the Arbitral Tribunal misdirected itself on both matters of fact and law and/or the application of the law. Counsel explained that is so because examination of the same by the Court would amount to exercising an appellate jurisdiction over the decision of the Tribunal, of which the Court has no jurisdiction. He relied on the case of DB Shapriya & Co. Ltd Vs Bish International BV (2) [2003] 2 EA 404 that Courts cannot interfere with findings of fact by an Arbitrator. Counsel stated that a mistake of fact or law is not a ground for setting aside or remitting an award for further consideration on the grounds of misconduct, as the Court’s intervention is limited to errors of law which are apparent on the face of the award. He stated that the application herein is incompetent and this Court does not have the jurisdiction to entertain it.
41. In responding to the issue of whether the Arbitrator considered all the issues raised and the prayers sought by the parties when making its final award, he submitted that the award was properly rendered and it did not offend any applicable laws. He contended that there are no intrinsic or extrinsic factors that would impeach the purity of the award as the Arbitrator dealt with all the issues and considered the evidence submitted when making his determination. Counsel relied on the case of Anne Mumbi Hinga v Victoria Njoki Gathara [2009] eKLR, that a party cannot set aside an award outside the grounds specified in Section 35 of the Act.
42. Mr. Muturi stated that as noted by the Court of Appeal in Nairobi Golf Hotels Ltd v Linotic Floor Company Ltd [2015] eKLR, the only grounds that would entitle a party to set aside an award are set out under Sections 35(2) and 37 of the Arbitration Act, 1995. He urged this Court to dismiss these grounds in the same terms as the Court of Appeal in the case of Nairobi Golf Hotels Ltd (supra) where the said Court noted that failure by the Arbitrator to arrive at a particular decision is not and cannot be a ground for setting aside an arbitral award, and that difference in interpretation of the law, or the facts cannot amount to misconduct under the above provisions.
43. Counsel expressed the view that the Arbitrator considered all the issues raised, the evidence tendered, the prayers sought and correctly applied the law to make his determination. Mr. Muturi stated that regarding the question of whether the applicants incurred any loss and damages due to termination of the contract, the Tribunal extensively addressed this issue in its award spanning from pages 38 to 60, and in paragraph 90 of the said award, the Tribunal found that considering the adverse impacts of the Covid-19 Pandemic, which directly affected the implementation of the contract by the applicants, the respondent lacked sufficient grounds to justify the termination of the said contract.
44. He stated that the Tribunal determined that the respondent could not rely on the delays in contract performance, which were caused by its own inefficiency, while disregarding the severe disruptions brought about by the Covid-19 Pandemic to the business operations between March 2020 and September 2020, the period during which the respondent purportedly terminated the contract and the Tribunal arrived at the opposite conclusion, stating that it was the respondent who breached the contract, not the applicant.
45. It was stated that the Tribunal proceeded to address the fundamental question of whether the applicants were entitled to the reliefs and remedies sought, which were presented within the applicants’ Statement of Claim. Counsel further stated that the comprehensive evaluation and deliberation can be found in the award at pages 60 to 66 of the Arbitral Award. He contended that by implication, the thorough examination not only provided a resolution to the applicants’ concerns about the possibility of seeking compensation for expenditures and expenses incurred during the contract's implementation should reinstatement not be granted, but also delved into the crucial matter of whether the applicants, as an alternative, were justified in claiming the awarded benefits and projected profits arising from the contract. It was submitted that all the remedies sought were considered and the Arbitrator made his determination on the basis of evidence.
46. On the issue of general damages, Mr. Muturi submitted that the Arbitrator was correct in failing to award such as it was in line with established legal jurisprudence that general damages cannot be awarded in claims for breach of contract. He relied on the case of Consolata Anyango Ouma vs. South Nyanza Sugar Co. Ltd [2015] eKLR, where the High Court provided an elucidation on the reasons why general damages cannot be awarded in cases of breach of contract, as such damages are not damages at large or general damages, but are in the nature of special damages and they must be pleaded and proved.
47. He also relied on the decisions in Coast Bus Service Ltd v Sisco Murunga Ndanyi & 2 others, NRB CA Civil Appeal No. 192 of 92 (UR) and Charles C. Sande v Kenya Co-operative Creameries Ltd NRB CA Civil Appeal No. 154 of 1992 (UR). He also relied on the Court of Appeal decision in Kenya Tourist Development Corporation v Sundowner Lodge Limited [2018] eKLR, to propound on the said legal principle.
48. Mr. Muturi also cited the Court of Appeal decision in Dharamshi vs. Karsan [1974] EA 41, where the former Court of Appeal held that general damages are not allowable in addition to quantified damages with Mustafa J.A expressing the view that such an award would amount to duplication. Counsel expressed the view that the Arbitrator was correct in dismissing the claim for general damages.
49. Mr. Muturi submitted that special damages require strict proof before being awarded, as established in the case of Equity Bank Limited v Gerald Wang'ombe Thuni [2015] eKLR, and the applicants herein were under an obligation to substantiate the claimed amounts with sufficient evidence during the arbitration proceedings, but they only managed to provide evidence supporting the amount of Kshs.8,353,546 out of the claimed Kshs.14,771,793. As per the evidence presented which included detailed receipts, invoices, and expenditure records that verified specific costs incurred during the implementation of the project, and that the remaining portion of the claim amounting to Kshs.6,418,247 lacked the necessary evidentiary support and could not be awarded by the Arbitral Tribunal.
50. Counsel stated that as regards the claim of Kshs.132,353,665.13 which emanated from a report proffered by the applicants’ Accountant, the veracity and validity of the said claim came under profound scrutiny by the Arbitral Tribunal, which ascertained that the report's underlying basis and methodology were bereft of soundness, leading to questionable assumptions and computations. Additionally, that the report lacked substantive evidentiary support to corroborate its assertions concerning the alleged loss of anticipated revenue share hence the Tribunal rightfully determined that the said claim suffered from a dearth of credible substantiation, rendering it unmeritorious.
51. Counsel stated that from the applicants’ application and the submissions, it has been alleged that the Arbitrator failed to consider provisions stipulated in the Arbitration Act, The Public Procurement and Asset Disposal Act, and the Constitution of Kenya 2010, Counsel contended that no particulars of the acts or omissions were provided to support such allegations and that they were also not pleaded clearly in the application and that the Arbitrator soundly determined the applicants’ claims and evidence, and based on sound reasoning awarded the applicant what he considered proved, thus the applicant cannot fault the Arbitrator for dismissing unsubstantiated claims as he was duty bound to consider the evidence presented by the applicants and make his determination.
52. The respondent’s Counsel stated that the applicant cannot blame the Arbitrator for dismissing most claims or in any way by complaining that there was no equity and fairness since they did not provide credible evidence to prove the bulk of their claims.
53. In response as to whether the Arbitral Award violates the principles of Kenya's Public Policy, Mr. Muturi submitted that Arbitration is a consensual alternative dispute resolution mechanism that parties opt for to resolve their disputes outside the conventional judicial process, with one of the key advantages of arbitration being the finality and efficiency it affords, promoting expeditious resolution and reducing the burden on the Courts. He expounded that the principle of finality ensures that parties can confidently rely on the Arbitral Award thereby upholding the integrity of the arbitration process. Counsel stated that in addressing the said issue, Justice Ringera (as he then was) in the case of Christ for All Nations v Apollo Insurance Co. Ltd [2002] 2 EA 366 cited in the case of Intoil Limited & another v Total Kenya Limited & 3 others [2013] eKLR. Counsel also relied on the Court of Appeal case of Ann Mumbi Hinga -vs- Victoria Njoki Gathara (supra).
54. Mr. Muturi submitted that public policy serves as a safeguard to uphold the fundamental values and interests of the society by ensuring that legal principles are not undermined, but invoking the public policy ground to challenge an Arbitral Award requires a cautious and prudent approach, as it pertains to the core tenets of the nation's legal system and societal welfare. He urged that in scrutinizing the Arbitrator's decision, it is essential for the Court to ascertain whether the alleged failure to address certain issues or consider specific legal provisions is of such a grave nature that it constitutes a flagrant departure from the principles of justice and fairness. He stated that Arbitral Tribunals are granted a degree of discretion in their decision making process, and the mere fact that a party such as the applicants herein are dissatisfied with the outcome or perceive an omission in the reasoning does not in itself amount to a violation of public policy.
55. He stated that for an Arbitral Award to be set aside based on public policy grounds, it must be manifestly evident that the award is repugnant to the fundamental principles of justice, offends against the State's public policy, or contravenes the essential norms and morals of society.
56. In response to the applicants’ contention that despite the Arbitrator's finding of the respondent's breach of the contract, the applicant was left without any remedy, Mr. Muturi submitted that the evidence presented clarifies that the said claim is unfounded, as the Arbitrator having established that the respondent breached the contract, proceeded to award the claimant damages as pleaded, subject to the condition of being substantiated through appropriate and admissible evidence. Counsel relied on the decision by Gikonyo J., in E.P. Communications Limited v East Africa Courier Services Limited [2019] eKLR that cases are decided on basis of facts proved by evidence, and the law applied to those facts. Counsel stated that the Arbitrator considered the facts and evidence before rendering his award and cannot be faulted for dismissing the applicants’ claims which were not proved, and the award cannot be regarded to being against public policy as claimed or at all.
57. In a rejoinder to the respondent’s submissions, Mr. Oyugi stated that the Arbitrator never considered at all whether general damages were due and payable to the claimants. Counsel stated that the respondent in paragraph 37 of its submissions has admitted that the Arbitrator was right in failing to award general damages and yet he never considered the same. Mr. Oyugi submitted that the Arbitrator was bound by Section 24(1) of the Arbitration Act,1995 to consider all the points in issue. He contended that the authorities cited by the respondent on general damages are not exhaustive on the subject, as there are exceptions to the general rule enunciated in the case of Consolata Anyango Ouma vs South Nyanza Sugar Co. Ltd (supra) cited and relied on by the respondent.
58. Counsel submitted that the Court of Appeal in Capital Fish Kenya Limited vs the Kenya Power Lighting Company Limited (supra) considered inter alia whether general damages are awarded in cases of breach of contract and the Court observed that whereas the general legal principle is that Courts do not normally award damages for breach of contract, there are exceptions such as when the conduct of the respondent is shown to be oppressing, high handed, outrageous, insolent or vindictive. He contended that the respondent's submission that general damages are not available as a general rule lacks substance, and the Arbitrator ought to have considered the exceptions to the general rule.
59. In regard to the case of Kenya Tourist Development Corporation vs Sundowner Lodge Limited (supra), relied on by the respondent, Mr. Oyugi indicated that their law firm had the privilege of participating in the proceedings both in the High Court and the Court of Appeal and contended that the decision is not final as the respondent therein preferred an appeal to the Supreme Court of Kenya, and the said matter is still pending before the Supreme Court. He further contended that the decision made so far is not final and cannot be said to be good law and/or an authority on the issue of whether general damages are payable for breach of contract.
ANALYSIS AND DETERMINATION
60. I have considered the application, the depositions made by the parties in respect to their factual positions in this matter and the submissions filed by their Counsel. The issue for determination is if the Arbitral Award should be set aside.
61. Section 35(2) of the Arbitration Act outlines the grounds upon which an Arbitral Award may be set aside in the following terms-
“An arbitral award may be set aside by the High Court only if—
(a) the party making the application furnishes proof—
(i) that a party to the arbitration agreement was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication of that law, the laws of Kenya; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the reference to arbitration or contains decisions on matters beyond the scope of the reference to arbitration, provided that if the decisions on matters referred to arbitration can be separated from those not so referred, only that part of the arbitral award which contains decisions on matters not referred to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless that agreement was in conflict with a provision of this Act from which the parties cannot derogate; or failing such agreement, was not in accordance with this Act; or
(vi) the making of the award was induced or affected by fraud, bribery, undue influence or corruption;
(b) the High Court finds that—
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of Kenya; or
(ii) the award is in conflict with the public policy of Kenya.
62. In the present application, there is no allegation that the Arbitrator made any act of omission or commission running counter to the provisions of Sections 35(2)(a)(i), (ii), (iii), (iv), (v) and (vi) of the Arbitration Act. The only allegation raised falls under the ambit of Section 35 of the Arbitration Act is that contemplated under Section 35(2)(b) on the Arbitral Award in issue being against the public policy of Kenya.
63. Apart from the above provisions, Section 39 of the Arbitration Act provides that parties to Arbitration can agree for the Court can determine any question of law arising in the course of Arbitration or that the Court may entertain an appeal on a question of law that arises.
64. In the case of Anne Mumbi Hinga vs Victoria Njoki Gathaara (supra), the Court of Appeal stated as follows on the jurisdiction of the High Court in arbitral matters-
“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 … We are concerned that contrary to the broad principles of finality of arbitral awards as set out in the Arbitration Act the Superior Court all the same entertained incompetent Applications which have in turn resulted in the 10 years delay in the enforcement of the award.”
65. Under the provisions of Section 39 of the Arbitration Act, issues of law can be referred to the High Court and can be the subject of an appeal where parties have so consented. In this matter, there is no consent to refer this matter to this Court on appeal. However in determining if the Arbitral Award conflicts with the public policy of Kenya, this Court has the jurisdiction to determine issues of whether the Arbitrator considered the provisions of Article 10 of the Constitution, on whether he considered and determined the issue of general damages prayed for by the applicants, and whether he exhaustively addressed his mind to the issue of awarding the applicants the projected revenue collection for 3 years arising from the contract between the parties herein and whether he correctly held that the evidence of the applicants’ Accountant who was called as an expert witness could not be relied on.
66. Bearing the provisions of Section 39 of the Arbitration Act in mind, there is no room for this Court to reconsider evidence submitted before the Arbitrator on issues of fact or law nor can this Court re-evaluate such evidence. The only recourse the applicants herein have which is open to this Court’s consideration is under Section 35(2)(b)(ii) of the Arbitration Act.
67. In regard to the Arbitral Award being against the public policy of Kenya, the applicants’ contention is that the respondent has been left to unjustly enrich itself at the expense of the applicants who have been left empty handed, yet they had invested in equipment that is now in the custody of the respondent. That the Arbitrator left the respondent smiling having not been made to pay for its breaches.
68. The applicants further contend that the Arbitrator treated the breaches made by the respondent lightly, yet they were fundamental in shaping the future contractual relationship involving the respondent and third parties and that the Arbitrator disregarded well settled principles of law of contract such as no injury is without a remedy. That he also disregarded the principles of equity enshrined in Article 10(2)(b) of the Constitution and also disregarded the provisions of the Public Procurement and Asset Disposal Act, 2015, under which the contract was entered.
69. In order to determine if the Arbitral Award goes against the public policy in Kenya, it is important to bear in mind the holding by Judge Ringera (as he then was), in the case of Christ for all Nations v Apollo Insurance Co. Ltd (supra) on some of the aspects that constitute public policy. The leaned Judge held as follows-
“Public policy is a broad concept incapable of precise definition. An award can be set aside under Section 35 (2) (b) (ii) of the Arbitration Act as being inconsistent with the public policy of Kenya if it is shown that it was either (a) inconsistent with the Constitution or any other law of Kenya whether written or unwritten, or (b) inimical to the national interest of Kenya, or (c) contrary to justice and morality………………..
I also do not accept the Applicant’s contention that the award is contrary to justice. To accept the Applicant’s contention would be tantamount to accepting a most dangerous notion that whenever a tribunal adopts an interpretation of a contract contrary to the understanding of one of the parties thereto, injustice is perpetrated. Justice is a doubt edged sword. It sometimes cuts the Plaintiff and other times the Defendant. Each of them must be prepared to bear the pain of justice cut with fortitude and without condemning the law’s justice as unjust. In my Judgment this is a perfect case of a suitor who strongly believed the Arbitrator was wrong in law and sought to overturn the award by involving the most elastic of the grounds for doing so. He must be told clearly that an error of fact or law or mixed fact and law of construction of statute or contract on the part of an arbitrator cannot be by any stretch of legal imagination, said to be inconsistent with the public policy of Kenya.”
70. Having looked at the statement of claim, one of the prayers sought by the applicants was for general damages for breach of contract. The applicants framed that as one of the issues for determination. I have perused the determination made by the Arbitrator in the Final Award and I am satisfied that the said Award was not inconsistent with the Constitution or any other laws of Kenya, as the Arbitrator addressed himself to the issues that were before him and found that the respondent breached the contract by terminating the same without sound reasons. When addressing the said issue, the Arbitrator held as follows-
“There was no justification for the Respondent to terminate the contract, and that some of these delays complained of by the Respondent were caused by the Respondents themselves. It is noteworthy that at the time the termination was effected on 5th October 2020, by denying the Claimants staff access to the stations, the Respondent had already received the Claimant's letter of 28th September, and the Claimant was to start implementing the revised action plan on 29th September 2020. After the letter dated 28th September, 2020, the Respondent did not write to the Claimants subsequent letters and emails. I find that the Respondent themselves contributed to the delays in the progress of work by failing to provide the items enumerated above, and also by the delays in answering requisite correspondence. The Respondent should not rely on the delays in Contract performance caused by their own inefficiency, while closing their eyes to the devastating effects of COVID-l9 to the conduct of business between March 2020 to September 2020 when they purported to terminate the Contract. My findings on the Respondent's act of terminating the Contract while there was no justification for doing so in the light of the effect of COVID-19, and my further findings that the Respondent was responsible for the delayed performance due to their failure to provide some essential services on time (office space, power connection, site handover etc.) coupled with unexplained delays in answering and acting upon correspondence are final. In view of the defaults on the part of the Respondent I find that the Respondent, and not the Claimant was in breach of Contract.”
71. It is this Court’s finding that the above decision by the Arbitrator was consistent with the Public Procurement and Disposal Act, 2015 and the regulations thereunder as well, as a contract that was entered into between the applicant and the respondent herein and the Arbitral Award in that regard cannot be said to be inconsistent with the said laws thereby rendering the Arbitral Award to be inconsistent with the public policy of Kenya.
72. The Court of Appeal in the case of Ann Mumbi Hinga vs Victoria Njoki Gathara (supra) held as follows on the issue of public policy-
“One of the grounds relied on to invite the Superior Courts intervention in not enforcing the award was that of alleged violation of the public policy. Again no intervention should have been tolerated firstly because one of the underlying principles in the Arbitration Act is the recognition of an important public policy in enforcement of arbitral awards and the principle of finality of arbitral awards and secondly although public policy can never be defined exhaustively and should be approached with extreme caution, failure of recognition on the ground of public policy would involve some element of illegality or that it would be injurious to the public good or would be wholly offensive to the ordinary reasonable and fully informed member of the public on whose behalf the State’s powers are exercised …In the arbitration agreement there is an implied agreement between the parties to carry out the ultimate award.”
73. The applicant cited the provisions of Article 10(2)(b) of the Constitution in alleging that the Arbitral Award was lop sided as the respondent was left in possession of the equipment that had been installed by the applicant, yet there was no adequate compensation for the same as the applicant left empty handed from the arbitral proceedings, thus there was no equity in the decision, thereby rendering the said Award to be inconsistent with the Constitution of Kenya. Article 10(2)(b) of the Constitution provides for the national values and principles of governance to include human dignity. equity, social justice, inclusiveness, equality, human rights, non-discrimination and protection of the marginalized.
74. The Supreme Court addressed this point and settled the law in the Nyutu Agrovet vs Airtel Networks Limited [2019] eKLR by pronouncing itself as follows-
“breaches of the Constitution are properly governed by Articles 165(3) and 258 of the said Constitution and cannot by litigational ingenuity be introduced for adjudication by the High Court by way of invocation of Section 35 of the Arbitration Act.”
75. The said allegation is far from the truth as the Arbitrator after finding that the respondent was in breach of contract awarded the applicant special damages that he considered to have been pleaded and proved. It is therefore not true that the applicant left the Arbitration proceedings empty handed. My finding of the Final Arbitral Award was not inconsistent with the Constitution, and as result, rendering it to be inconsistent with the public policy of Kenya. In this Court’s finding, the Arbitrator was a Court of equity, having treated both parties with an equal measure of fairness.
76. Although this Court agrees that the Arbitrator did not address the issue of whether general damages could be awarded for breach of contract, at this juncture, that on its own cannot be a ground for setting aside the Arbitral Award. Both Counsel submitted on the said issue, but this Court will steer clear of determining the said issue on merits, as failure by the Arbitrator to determine the issue would form a ground of appeal on a point of law. In my considered view, it cannot be said to be in conflict with the public policy of Kenya. The refusal by the Arbitrator to rely on the evidence of the Accountant on the projected revenue growth of the project, would also be a ground of appeal and cannot be termed to be to be in conflict with the public policy of Kenya.
77. This Court’s finding is that the application dated 3rd May, 2023 is without merit. It is dismissed with costs to the respondent.
DELIVERED, DATED and SIGNED at NAIROBI on this 1st day of December, 2023. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Mr. Manyara h/b for Mr. Oyugi for the applicant
Mr. Muturi for the respondent
Ms B. Wokabi – Court Assistant.
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL & TAX DIVISION
HCCOMM NO. E467 OF 2020
MASON SERVICES LIMITED &
QANTRA TECHNOLOGY LIMITED
(JOINT VENTURE)…………………………..…………....APPLICANTS
VERSUS
KENYA RAILWAYS CORPORATION ……………......RESPONDENT
RULING
1. On 5th May, 2023 the applicants filed a Notice of Motion dated 3rd May, 2023, brought under the provisions of Section 35 of the Arbitration Act, 1995 and Rule 7 of the Arbitration Rules, 1997, seeking the following orders-
(i) That the Honourable Court do set aside part of the Arbitral Award dated 27th day of April, 2023 and in particular set aside award (sic) in (a) and (b) of the Arbitral Award;
(ii) That the Honourable Court do vary the award by assessing the damages for breach of contract and/or loss of profits payable to the applicants and/or remit the matter back to the Arbitrator for assessment of damages for breach of contract/loss of profits; and
(iii) That the costs of the application be provided for.
2. The application is supported by an affidavit sworn on 3rd May, 2023 by Stephen Njoroge, a Director of the 1st applicant, Mason Services Ltd. The application was opposed by the respondent vide a replying affidavit sworn on 14th of June, 2023 by Christine Wahome, the Senior Legal Officer of the respondent.
3. The application was canvassed by way of written submissions. The applicants’ submissions were filed on 5th July, 2023 by the law firm of Oyugi & Company Advocates. The respondent’s submissions were filed on 5th August, 2023 by the law firm of Mwaniki Gachoka & Company Advocates.
4. In giving a background to the dispute that was before the Arbitrator, the applicants’ deponent stated that in the year 2019, the respondent placed a tender inviting the public to bid for installation and commissioning of an Integrated Parking Management System for the Standard Gauge Railway (SGR) passenger stations being TENDER NO. KRD /PLM / 00 5/Z0L8-2019 and the applicants won the competitive public tender. Counsel also stated that the applicants bid as a joint venture and were declared the winners after the entire process was concluded at a commisionary revenue sharing rate of 72.5% for the respondent and 27.5% for the applicants.
5. He further deposed that the successful bidder was expected to recover its financial investments during the period of the contract, which was three (3) years. He stated that the subject tender was divided into two (2) lots being LOT1 with a minimal annual guarantee of Kshs. 30,000,000/= and LOT2 with a minimal annual guarantee of Kshs. 20,000,000. That LOT-I comprised Mombasa Terminus and Voi Station and LOT-2 comprised Mtito-Andei Station and Nairobi Terminus.
6. The applicants averred that that the commencement period of the contract was set for I7th February, 2020 but it was later changed to 1st April, 2020, but due to the outbreak of the Covid-19 Pandemic, and that the Government of Kenya through the Ministry of Health suspended operations of the Madaraka Express Passenger Service with effect from the end of March to mid July 2020 when service resumed with reduced capacity.
7. The applicants contended that they were prevented from implementing the installation and commissioning due to the outbreak of the said Covid-19 Pandemic and its implications on movement and travels. The applicants also contended that the respondent was not co-operative from the outset of the project and frustrated the applicants in implementation of the project by delaying in replying to correspondences, handing over of the site, provision of office space and appointment of the Project Manager.
8. They averred that when the Madaraka Express resumed service although with reduced capacity, the applicants had almost finished the installation works at the Nairobi Terminus and had started collecting parking charges, and they had also started installation works at the Mombasa terminus but had not commenced work at the Voi and Mtito-Andei Stations as the said stations had not been handed over to the applicants.
9. They deposed that on 8th September 2020, the respondent wrote a letter to the applicants and expressed its dissatisfaction with the work done by the applicants and demanded immediate remedials despite the respondent's knowledge of the effect of the Covid-19 Pandemic, and on 28th September 2020, the applicants replied to the respondent's said letter and gave a detailed plan for completion of the remaining works in Nairobi, Mombasa, Voi and Mtito-Andei.
10. The applicants deposed that on 5th October, 2020, the respondent without prior notice and in total breach of the contract and the provisions of the law, terminated the contract on site by denying the applicants' workers entry to their places of work, and that the respondent failed, neglected and/or refused to respond to the applicants' letter of 5th October, 2020 which letter was demanding to know the cause of the termination. That the respondent failed, neglected and/or refused to respond to all subsequent communications sent by the applicants' Counsel until February 202I when it started to cooperate, and that since the contract made a provision for solving of disputes, with the last resort being arbitration, on 15th April 2021, the applicants filed an arbitration claim against the respondent dated 13th April, 2021.
11. The applicants claim that the Arbitrator misconducted himself by failing, neglecting, and/or refusing to deal with all the issues submitted by the applicants and in particular, issues Nos. (vi), (viii), (ix) and (x) found at pages (vii) and (viii) of the claim. They deposed that they tendered their evidence based on all the issues submitted to the Arbitrator for determination and he was obligated to deal with all the issues and his failure, neglect and/or refusal to deal with the same amounts to a procedural irregularity, hence a misconduct on the part of the Arbitrator.
12. The applicants further claim that the Arbitrator having made a finding of fact and law that the respondent was in breach of the contract without any just cause and his failure, neglect and/or refusal to award damages as compensation for the said breach and his failure to deal with it caused substantial injustice to the applicants. They reiterated that the contract was for sharing of revenue collected for three (3) years and they entered into the contract to make profits and employed substantial resources with a view to make profits within the said period. The applicants claim that the Arbitrator misconducted himself when he disallowed the claim for loss of projected profits for the period of three (3) years amounting to Kshs. 132,353,665.13.
13. That there was a professional report prepared by the applicants' witness No. 2, Dickson Omurunga Omusula, which ought to have guided the Arbitrator in arriving at a just and fair award on loss of projected profit since the contract was for revenue sharing and the Arbitrator was wrong in assuming that there was no revenue to be earned during the period. That the Arbitrator misconducted himself when he failed and/or refused to assess the damages and/or loss suffered by the applicants as a consequence of the respondent's breach of contract and in doing so, breached the provisions of Section 29(4) of the Arbitration Act, 1995 which required him to determine the dispute according to considerations of justice and fairness.
14. The applicants allege that the Arbitrator misconducted himself by disallowing part of special claim comprising more than Kshs. 6,000,000/= when there were sufficient materials in support of their claim vide valid receipts and invoices produced by the applicants in support of the equipment installed by the applicants, which equipment is in use for the benefit of the respondent to-date and yet the cost of the said equipment was disregarded by the Arbitrator.
15. The applicants averred that the Arbitral award was made contrary to the principles of equity recognized in Article 10(2)(b) of the Constitution of Kenya and consequently, part of the award is contrary to the public policy of Kenya. The applicants allege that the respondent breached the contract and has unjustly enriched itself since it continues using equipment installed by the applicants but the overall objective of arbitration which was to do justice to both parties involved in the arbitration will not be achieved at all, if part of the award is not set aside as it will result into substantial loss to the applicants.
16. In the replying affidavit, the respondent averred that the dispute between the applicants and the respondent was referred to arbitration for determination pursuant to the provisions of Clause 13 of the agreement dated 7th February, 2020, and that the parties vide a letter dated 9th March, 2021 settled for Mr. Patterson Kamara sitting as the sole Arbitrator to hear and determine the dispute and on hearing the dispute on various dates, he delivered an award on 27th April, 2023.
17. The respondent contended that the application fails to establish sufficient or justifiable grounds as required by Section 35 of the Arbitration Act, 1995 to warrant this Court to set aside the Arbitral Award dated 27th April, 2023. The respondent further contended that the instant application is an appeal disguised as an application to set aside the arbitral award as the applicants are seeking the Court to set aside the orders of the Arbitrator and replace them or vary them with the decision of this Court without any basis and that the application is challenging both the law and facts of the Arbitral Award, rather than a genuine application seeking to set it aside.
18. The respondent deposed that there is no valid ground for setting aside the Arbitral Award as the Arbitrator rightfully dismissed the bulk of the applicant’s claim comprising Kshs.14,771,793.00 being special damages and Kshs.132,783,655.13 being the loss of projected profits as there was no evidence to prove such claims, and noting that the claims were baseless, the Arbitrator rightfully dismissed the claims. It also deposed that the Arbitrator’s determination to the effect that the applicant did not provide sufficient evidence to prove its claims cannot be deemed as being against public interest as alleged, especially noting that the claims were special damage claims in nature.
19. That in regard to the special damage claim, although the Arbitrator found that the respondent had breached the subject contract, he found that most of the special damages’ claim and loss of projected profits not to have been proved adequately by way of sufficient evidence.
20. The respondent averred that in regard to the claim for Kshs.14,771,793.00, the Arbitrator found that the applicant had proved the sum of Kshs.8,353,546.00 as having been specifically proved by way of valid evidence such as by invoices and/or receipts.
21. That in regard to the claim for the sum of Kshs.132,783,655.13 being the loss of projected profits for three (3) years, the same arose from a report prepared by the applicants’ Accountant but the veracity and the authenticity of the aforementioned report were called to question and the report was inconsistent and unbelievable, and the Arbitral Tribunal found that the report was flawed in terms of its preparation and the unsupported assumptions made therein, leading to the projected figure of Kshs.132,783,655.13, as being the loss of revenue for three (3) years without failing the legal requirement for proving special damages with specificity. The respondent stated that the Arbitral Tribunal rightfully disregarded the claim for projected profits.
22. The respondent deposed that the Arbitrator dealt with all the issues raised by the parties when making his award thus the applicants’ allegations are baseless and false. The respondent contended that there were no procedural irregularities that were committed by the Arbitral Tribunal as alleged or at all, and that the said Tribunal considered all the relevant laws, regulations and legal principles.
23. The respondent concluded its depositions by contending that the instant application is another attempt by the applicants to re-litigate the aforementioned issues before this Court, which goes against the principle of finality of arbitral proceedings.
24. In their written submissions, Mr. Oyugi, the applicants’ Counsel contended that the Arbitrator failed to deal with issue Nos. vi, viii, ix and x as framed by them, which were crucial in determination of the claim, without offering any reason at all, thereby misconducting himself.
25. In regard to issue No. vi on whether the applicants suffered loss and damage due to termination of the contract, Counsel stated that the point in issue as framed was relevant and crucial in determining the dispute as the claimant had done substantial works and used their resources in doing the said work and that the respondent was not justified in terminating the contract and blaming the respondent for breach of contract.
26. In regard to issue No. viii as to whether if the applicants were not reinstated they could be compensated for expenditure and expenses incurred in implementing the contract, Mr. Oyugi stated that the above issue was not dealt with by the Arbitrator and that he never gave any reasons as to why he failed, neglected, and/or refused to determine the same. Counsel contended that the evidence by the respondent’s main witness and the finding made by the Arbitrator on the works done by the applicants in Nairobi and Mombasa justified the consideration of the said point in issue.
27. In regard to point No. x on whether general damages can be awarded to the applicants for breach of contract by the respondent, Mr. Oyugi submitted that the Arbitrator made findings of facts and law which blamed the respondent for breach of contract and he did not find any justification for breach of contract at all but he failed, neglected and refused to consider all the points in issue which were essential to the applicant’s claim. He contended that the default resulted in substantial miscarriage of justice to the applicants and that at the said omission amounts to a procedural irregularity. Counsel relied on opinion of the learned Authors of the treatise Russel on Arbitration at paragraph 8-094 at p. 494 on the issue of failure to deal with all the issues raised by the parties to the Arbitral agreement.
28. Counsel also relied on the case of Patrick Muturi v Kenindia Assurance Company Limited [2016] eKLR, where Judge F. Gikonyo set aside an Arbitral Award and remitted the matter to arbitration due to omission on the part of the Arbitrator to deal with an issue presented for determination. Counsel cited the Court of Appeal decision in Kukal Properties Development Ltd v Tafazzal H. Maloo & others [1993] eKLR, on the issue of omission to deal with an issue framed for determination.
29. The applicants’ Counsel contended that the Arbitrator failed to determine if general damages could be awarded for breach of contract by the respondent. He also contended that the Arbitrator failed to consider the provisions of the Arbitration Act, 1995, the Public Procurement and Disposal Act, 2015 and Article 10(2)(b) of the Constitution of Kenya, 2010.
30. In the applicants’ submissions, their Counsel stated that the Arbitral Award is incomplete by failure to consider all the issues that called for determination.
31. Counsel also stated that the Arbitrator overlooked and/or failed to consider and/or take proper account of the applicants’ evidence tendered in the dispute. He stated that the applicants submitted documents as exhibits but the Arbitrator disallowed the applicants’ loss of projected profits of Kshs.132,783,655.13 based on the report presented by the respondent’s 2nd witness, Mr. Dickson Omurunga Omusula, without taking into account that the contract was a revenue collection share from parking fees and the tender documents had projections based on its feasibility study and proposed parking tariffs. Counsel contended that the dismissal of the applicants’ claim on the said heading without finding an appropriate sum payable was wrong as the said witness would have said how much the applicants could have earned had the contract not been terminated. The applicants’ Counsel relied on the case of Evangelical Mission of Kenya and another v Kimani Gachuhi and another [2015] eKLR, where Ogolla J, pronounced himself on the applicability of Article 10 of the Constitution by Courts and Arbitrators in deciding disputes before them
32. Mr. Oyugi stated that the Arbitral Award is against the public policy of Kenya by disregarding known settled principles of law of contract such as no injury is without a remedy, and the principles of equity enshrined in Article 10(2)(b) of the Constitution. He contended that the Arbitrator also disregarded the provisions of the Public Procurement and Asset Disposal Act, 2015, under which the contract was entered.
33. It was submitted that the Arbitrator treated the breaches made by the respondent lightly and yet they were fundamental in shaping the future contractual relationship involving the respondent and third parties, and that he left the applicants empty handed, yet they had invested in equipment that is now in the custody of the respondent. It was also submitted that the Arbitrator left the respondent smiling having not been made to pay for its breaches.
34. Counsel argued that this is a classic case that goes against the public policy of Kenya as one party to the contract has been left to unjustly enrich itself at the expense of the other party. He cited the decision by Judge Ringera, (as he then was), in Christ for all Nations v Apollo Insurance Co. Ltd [2002] 2 EA.
35. Mr. Muturi, the respondent’s Counsel, in his written submissions stated that from the application, it is apparent that the applicants are seeking to set aside part of the Arbitral Award on the quantum of the damages awarded by the Arbitrator in addition to moving this Court to vary the award by assessing damages and/or loss of profits payable to the applicants, on the basis that the Arbitrator failed to deal with the issues put for determination, neglected, and refused to consider an award for damages payable to the applicants and that that he overlooked and failed to consider or take proper account of the evidence tendered before him.
36. Counsel contended that from the prayers in the application and the grounds therein, the instant application is a merit appeal against the Arbitral Award which is disguised as an application for setting aside the said Award under Section 35 of the Arbitration Act, as it is challenging the merits of the decision on both the application of facts and interpretation of the law by the Arbitrator. He stated that the application is vexatious and an abuse of the Court process.
37. He relied on the decision by the Supreme Court of Kenya in the case of Geo Chem Middle East v Kenya Bureau of Standards [2020] eKLR, and submitted that arbitration is meant to expeditiously resolve commercial and other disputes where parties have submitted themselves to that dispute resolution mechanism. Counsel further submitted that the role of Courts to interfere with arbitral processes and awards is greatly diminished notwithstanding the narrow window created by Sections 35 and 39 of the Act.
38. Mr. Muturi submitted that delving into a merited assessment of the Arbitral Award as requested herein will inevitably lead the High Court to assuming the mantle of an appellate body, which would unmistakably contravene Kenya's fervent public policy, loudly pronouncing the intention of bestowing finality upon Arbitral Awards and decisively discouraging the Court from embarking on appeals over the Arbitral Tribunal's decisions. Counsel referred to Section 10 of the Arbitration Act which specifically states that Courts shall not intervene in matters governed by the Arbitration Act unless as provided for in the said Act. He contended that as acknowledged by the Supreme Court in the Geo Chem case (supra), Courts do not have authority or powers to make assessments of the merits of the Arbitral Award when making its determination of an application to set aside an Arbitral Award under Section 35 of the Act, as the jurisdiction to set aside is only limited to the specific grounds
39. Mr. Muturi submitted that in dealing with an application seeking to set aside an Arbitral Award, the Court should not delve on re-evaluating the decision of the Arbitrator with a view of replacing or substituting the decision with its own decision. He cited the decision of the Court of Appeal, in the Synergy Industrial Credit Ltd v Cape Holdings Ltd [2020] eKLR, which underscored one of the fundamental attributes of the Arbitration Act that firmly upholds the principle of finality in arbitral proceedings and the principle of party autonomy. He stated that this hallmark feature endows parties with the prerogative to resolve their disputes with finality within the forum and method of their choosing.
40. Counsel submitted that the instances where the Court may intervene in arbitral proceedings or interfere with an Arbitral Award are expressly and restrictively circumscribed by the specific provisions enshrined within the Act. He cited a decision by Lady Justice Grace Nzioka in the case of Margaret Gacigi Gecaga v Udi Mareka Gecaga & another [2020] eKLR, where the Judge held that a party cannot challenge an award on the basis that the Arbitral Tribunal misdirected itself on both matters of fact and law and/or the application of the law. Counsel explained that is so because examination of the same by the Court would amount to exercising an appellate jurisdiction over the decision of the Tribunal, of which the Court has no jurisdiction. He relied on the case of DB Shapriya & Co. Ltd Vs Bish International BV (2) [2003] 2 EA 404 that Courts cannot interfere with findings of fact by an Arbitrator. Counsel stated that a mistake of fact or law is not a ground for setting aside or remitting an award for further consideration on the grounds of misconduct, as the Court’s intervention is limited to errors of law which are apparent on the face of the award. He stated that the application herein is incompetent and this Court does not have the jurisdiction to entertain it.
41. In responding to the issue of whether the Arbitrator considered all the issues raised and the prayers sought by the parties when making its final award, he submitted that the award was properly rendered and it did not offend any applicable laws. He contended that there are no intrinsic or extrinsic factors that would impeach the purity of the award as the Arbitrator dealt with all the issues and considered the evidence submitted when making his determination. Counsel relied on the case of Anne Mumbi Hinga v Victoria Njoki Gathara [2009] eKLR, that a party cannot set aside an award outside the grounds specified in Section 35 of the Act.
42. Mr. Muturi stated that as noted by the Court of Appeal in Nairobi Golf Hotels Ltd v Linotic Floor Company Ltd [2015] eKLR, the only grounds that would entitle a party to set aside an award are set out under Sections 35(2) and 37 of the Arbitration Act, 1995. He urged this Court to dismiss these grounds in the same terms as the Court of Appeal in the case of Nairobi Golf Hotels Ltd (supra) where the said Court noted that failure by the Arbitrator to arrive at a particular decision is not and cannot be a ground for setting aside an arbitral award, and that difference in interpretation of the law, or the facts cannot amount to misconduct under the above provisions.
43. Counsel expressed the view that the Arbitrator considered all the issues raised, the evidence tendered, the prayers sought and correctly applied the law to make his determination. Mr. Muturi stated that regarding the question of whether the applicants incurred any loss and damages due to termination of the contract, the Tribunal extensively addressed this issue in its award spanning from pages 38 to 60, and in paragraph 90 of the said award, the Tribunal found that considering the adverse impacts of the Covid-19 Pandemic, which directly affected the implementation of the contract by the applicants, the respondent lacked sufficient grounds to justify the termination of the said contract.
44. He stated that the Tribunal determined that the respondent could not rely on the delays in contract performance, which were caused by its own inefficiency, while disregarding the severe disruptions brought about by the Covid-19 Pandemic to the business operations between March 2020 and September 2020, the period during which the respondent purportedly terminated the contract and the Tribunal arrived at the opposite conclusion, stating that it was the respondent who breached the contract, not the applicant.
45. It was stated that the Tribunal proceeded to address the fundamental question of whether the applicants were entitled to the reliefs and remedies sought, which were presented within the applicants’ Statement of Claim. Counsel further stated that the comprehensive evaluation and deliberation can be found in the award at pages 60 to 66 of the Arbitral Award. He contended that by implication, the thorough examination not only provided a resolution to the applicants’ concerns about the possibility of seeking compensation for expenditures and expenses incurred during the contract's implementation should reinstatement not be granted, but also delved into the crucial matter of whether the applicants, as an alternative, were justified in claiming the awarded benefits and projected profits arising from the contract. It was submitted that all the remedies sought were considered and the Arbitrator made his determination on the basis of evidence.
46. On the issue of general damages, Mr. Muturi submitted that the Arbitrator was correct in failing to award such as it was in line with established legal jurisprudence that general damages cannot be awarded in claims for breach of contract. He relied on the case of Consolata Anyango Ouma vs. South Nyanza Sugar Co. Ltd [2015] eKLR, where the High Court provided an elucidation on the reasons why general damages cannot be awarded in cases of breach of contract, as such damages are not damages at large or general damages, but are in the nature of special damages and they must be pleaded and proved.
47. He also relied on the decisions in Coast Bus Service Ltd v Sisco Murunga Ndanyi & 2 others, NRB CA Civil Appeal No. 192 of 92 (UR) and Charles C. Sande v Kenya Co-operative Creameries Ltd NRB CA Civil Appeal No. 154 of 1992 (UR). He also relied on the Court of Appeal decision in Kenya Tourist Development Corporation v Sundowner Lodge Limited [2018] eKLR, to propound on the said legal principle.
48. Mr. Muturi also cited the Court of Appeal decision in Dharamshi vs. Karsan [1974] EA 41, where the former Court of Appeal held that general damages are not allowable in addition to quantified damages with Mustafa J.A expressing the view that such an award would amount to duplication. Counsel expressed the view that the Arbitrator was correct in dismissing the claim for general damages.
49. Mr. Muturi submitted that special damages require strict proof before being awarded, as established in the case of Equity Bank Limited v Gerald Wang'ombe Thuni [2015] eKLR, and the applicants herein were under an obligation to substantiate the claimed amounts with sufficient evidence during the arbitration proceedings, but they only managed to provide evidence supporting the amount of Kshs.8,353,546 out of the claimed Kshs.14,771,793. As per the evidence presented which included detailed receipts, invoices, and expenditure records that verified specific costs incurred during the implementation of the project, and that the remaining portion of the claim amounting to Kshs.6,418,247 lacked the necessary evidentiary support and could not be awarded by the Arbitral Tribunal.
50. Counsel stated that as regards the claim of Kshs.132,353,665.13 which emanated from a report proffered by the applicants’ Accountant, the veracity and validity of the said claim came under profound scrutiny by the Arbitral Tribunal, which ascertained that the report's underlying basis and methodology were bereft of soundness, leading to questionable assumptions and computations. Additionally, that the report lacked substantive evidentiary support to corroborate its assertions concerning the alleged loss of anticipated revenue share hence the Tribunal rightfully determined that the said claim suffered from a dearth of credible substantiation, rendering it unmeritorious.
51. Counsel stated that from the applicants’ application and the submissions, it has been alleged that the Arbitrator failed to consider provisions stipulated in the Arbitration Act, The Public Procurement and Asset Disposal Act, and the Constitution of Kenya 2010, Counsel contended that no particulars of the acts or omissions were provided to support such allegations and that they were also not pleaded clearly in the application and that the Arbitrator soundly determined the applicants’ claims and evidence, and based on sound reasoning awarded the applicant what he considered proved, thus the applicant cannot fault the Arbitrator for dismissing unsubstantiated claims as he was duty bound to consider the evidence presented by the applicants and make his determination.
52. The respondent’s Counsel stated that the applicant cannot blame the Arbitrator for dismissing most claims or in any way by complaining that there was no equity and fairness since they did not provide credible evidence to prove the bulk of their claims.
53. In response as to whether the Arbitral Award violates the principles of Kenya's Public Policy, Mr. Muturi submitted that Arbitration is a consensual alternative dispute resolution mechanism that parties opt for to resolve their disputes outside the conventional judicial process, with one of the key advantages of arbitration being the finality and efficiency it affords, promoting expeditious resolution and reducing the burden on the Courts. He expounded that the principle of finality ensures that parties can confidently rely on the Arbitral Award thereby upholding the integrity of the arbitration process. Counsel stated that in addressing the said issue, Justice Ringera (as he then was) in the case of Christ for All Nations v Apollo Insurance Co. Ltd [2002] 2 EA 366 cited in the case of Intoil Limited & another v Total Kenya Limited & 3 others [2013] eKLR. Counsel also relied on the Court of Appeal case of Ann Mumbi Hinga -vs- Victoria Njoki Gathara (supra).
54. Mr. Muturi submitted that public policy serves as a safeguard to uphold the fundamental values and interests of the society by ensuring that legal principles are not undermined, but invoking the public policy ground to challenge an Arbitral Award requires a cautious and prudent approach, as it pertains to the core tenets of the nation's legal system and societal welfare. He urged that in scrutinizing the Arbitrator's decision, it is essential for the Court to ascertain whether the alleged failure to address certain issues or consider specific legal provisions is of such a grave nature that it constitutes a flagrant departure from the principles of justice and fairness. He stated that Arbitral Tribunals are granted a degree of discretion in their decision making process, and the mere fact that a party such as the applicants herein are dissatisfied with the outcome or perceive an omission in the reasoning does not in itself amount to a violation of public policy.
55. He stated that for an Arbitral Award to be set aside based on public policy grounds, it must be manifestly evident that the award is repugnant to the fundamental principles of justice, offends against the State's public policy, or contravenes the essential norms and morals of society.
56. In response to the applicants’ contention that despite the Arbitrator's finding of the respondent's breach of the contract, the applicant was left without any remedy, Mr. Muturi submitted that the evidence presented clarifies that the said claim is unfounded, as the Arbitrator having established that the respondent breached the contract, proceeded to award the claimant damages as pleaded, subject to the condition of being substantiated through appropriate and admissible evidence. Counsel relied on the decision by Gikonyo J., in E.P. Communications Limited v East Africa Courier Services Limited [2019] eKLR that cases are decided on basis of facts proved by evidence, and the law applied to those facts. Counsel stated that the Arbitrator considered the facts and evidence before rendering his award and cannot be faulted for dismissing the applicants’ claims which were not proved, and the award cannot be regarded to being against public policy as claimed or at all.
57. In a rejoinder to the respondent’s submissions, Mr. Oyugi stated that the Arbitrator never considered at all whether general damages were due and payable to the claimants. Counsel stated that the respondent in paragraph 37 of its submissions has admitted that the Arbitrator was right in failing to award general damages and yet he never considered the same. Mr. Oyugi submitted that the Arbitrator was bound by Section 24(1) of the Arbitration Act,1995 to consider all the points in issue. He contended that the authorities cited by the respondent on general damages are not exhaustive on the subject, as there are exceptions to the general rule enunciated in the case of Consolata Anyango Ouma vs South Nyanza Sugar Co. Ltd (supra) cited and relied on by the respondent.
58. Counsel submitted that the Court of Appeal in Capital Fish Kenya Limited vs the Kenya Power Lighting Company Limited (supra) considered inter alia whether general damages are awarded in cases of breach of contract and the Court observed that whereas the general legal principle is that Courts do not normally award damages for breach of contract, there are exceptions such as when the conduct of the respondent is shown to be oppressing, high handed, outrageous, insolent or vindictive. He contended that the respondent's submission that general damages are not available as a general rule lacks substance, and the Arbitrator ought to have considered the exceptions to the general rule.
59. In regard to the case of Kenya Tourist Development Corporation vs Sundowner Lodge Limited (supra), relied on by the respondent, Mr. Oyugi indicated that their law firm had the privilege of participating in the proceedings both in the High Court and the Court of Appeal and contended that the decision is not final as the respondent therein preferred an appeal to the Supreme Court of Kenya, and the said matter is still pending before the Supreme Court. He further contended that the decision made so far is not final and cannot be said to be good law and/or an authority on the issue of whether general damages are payable for breach of contract.
ANALYSIS AND DETERMINATION
60. I have considered the application, the depositions made by the parties in respect to their factual positions in this matter and the submissions filed by their Counsel. The issue for determination is if the Arbitral Award should be set aside.
61. Section 35(2) of the Arbitration Act outlines the grounds upon which an Arbitral Award may be set aside in the following terms-
“An arbitral award may be set aside by the High Court only if—
(a) the party making the application furnishes proof—
(i) that a party to the arbitration agreement was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication of that law, the laws of Kenya; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the reference to arbitration or contains decisions on matters beyond the scope of the reference to arbitration, provided that if the decisions on matters referred to arbitration can be separated from those not so referred, only that part of the arbitral award which contains decisions on matters not referred to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless that agreement was in conflict with a provision of this Act from which the parties cannot derogate; or failing such agreement, was not in accordance with this Act; or
(vi) the making of the award was induced or affected by fraud, bribery, undue influence or corruption;
(b) the High Court finds that—
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law of Kenya; or
(ii) the award is in conflict with the public policy of Kenya.
62. In the present application, there is no allegation that the Arbitrator made any act of omission or commission running counter to the provisions of Sections 35(2)(a)(i), (ii), (iii), (iv), (v) and (vi) of the Arbitration Act. The only allegation raised falls under the ambit of Section 35 of the Arbitration Act is that contemplated under Section 35(2)(b) on the Arbitral Award in issue being against the public policy of Kenya.
63. Apart from the above provisions, Section 39 of the Arbitration Act provides that parties to Arbitration can agree for the Court can determine any question of law arising in the course of Arbitration or that the Court may entertain an appeal on a question of law that arises.
64. In the case of Anne Mumbi Hinga vs Victoria Njoki Gathaara (supra), the Court of Appeal stated as follows on the jurisdiction of the High Court in arbitral matters-
“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 … We are concerned that contrary to the broad principles of finality of arbitral awards as set out in the Arbitration Act the Superior Court all the same entertained incompetent Applications which have in turn resulted in the 10 years delay in the enforcement of the award.”
65. Under the provisions of Section 39 of the Arbitration Act, issues of law can be referred to the High Court and can be the subject of an appeal where parties have so consented. In this matter, there is no consent to refer this matter to this Court on appeal. However in determining if the Arbitral Award conflicts with the public policy of Kenya, this Court has the jurisdiction to determine issues of whether the Arbitrator considered the provisions of Article 10 of the Constitution, on whether he considered and determined the issue of general damages prayed for by the applicants, and whether he exhaustively addressed his mind to the issue of awarding the applicants the projected revenue collection for 3 years arising from the contract between the parties herein and whether he correctly held that the evidence of the applicants’ Accountant who was called as an expert witness could not be relied on.
66. Bearing the provisions of Section 39 of the Arbitration Act in mind, there is no room for this Court to reconsider evidence submitted before the Arbitrator on issues of fact or law nor can this Court re-evaluate such evidence. The only recourse the applicants herein have which is open to this Court’s consideration is under Section 35(2)(b)(ii) of the Arbitration Act.
67. In regard to the Arbitral Award being against the public policy of Kenya, the applicants’ contention is that the respondent has been left to unjustly enrich itself at the expense of the applicants who have been left empty handed, yet they had invested in equipment that is now in the custody of the respondent. That the Arbitrator left the respondent smiling having not been made to pay for its breaches.
68. The applicants further contend that the Arbitrator treated the breaches made by the respondent lightly, yet they were fundamental in shaping the future contractual relationship involving the respondent and third parties and that the Arbitrator disregarded well settled principles of law of contract such as no injury is without a remedy. That he also disregarded the principles of equity enshrined in Article 10(2)(b) of the Constitution and also disregarded the provisions of the Public Procurement and Asset Disposal Act, 2015, under which the contract was entered.
69. In order to determine if the Arbitral Award goes against the public policy in Kenya, it is important to bear in mind the holding by Judge Ringera (as he then was), in the case of Christ for all Nations v Apollo Insurance Co. Ltd (supra) on some of the aspects that constitute public policy. The leaned Judge held as follows-
“Public policy is a broad concept incapable of precise definition. An award can be set aside under Section 35 (2) (b) (ii) of the Arbitration Act as being inconsistent with the public policy of Kenya if it is shown that it was either (a) inconsistent with the Constitution or any other law of Kenya whether written or unwritten, or (b) inimical to the national interest of Kenya, or (c) contrary to justice and morality………………..
I also do not accept the Applicant’s contention that the award is contrary to justice. To accept the Applicant’s contention would be tantamount to accepting a most dangerous notion that whenever a tribunal adopts an interpretation of a contract contrary to the understanding of one of the parties thereto, injustice is perpetrated. Justice is a doubt edged sword. It sometimes cuts the Plaintiff and other times the Defendant. Each of them must be prepared to bear the pain of justice cut with fortitude and without condemning the law’s justice as unjust. In my Judgment this is a perfect case of a suitor who strongly believed the Arbitrator was wrong in law and sought to overturn the award by involving the most elastic of the grounds for doing so. He must be told clearly that an error of fact or law or mixed fact and law of construction of statute or contract on the part of an arbitrator cannot be by any stretch of legal imagination, said to be inconsistent with the public policy of Kenya.”
70. Having looked at the statement of claim, one of the prayers sought by the applicants was for general damages for breach of contract. The applicants framed that as one of the issues for determination. I have perused the determination made by the Arbitrator in the Final Award and I am satisfied that the said Award was not inconsistent with the Constitution or any other laws of Kenya, as the Arbitrator addressed himself to the issues that were before him and found that the respondent breached the contract by terminating the same without sound reasons. When addressing the said issue, the Arbitrator held as follows-
“There was no justification for the Respondent to terminate the contract, and that some of these delays complained of by the Respondent were caused by the Respondents themselves. It is noteworthy that at the time the termination was effected on 5th October 2020, by denying the Claimants staff access to the stations, the Respondent had already received the Claimant's letter of 28th September, and the Claimant was to start implementing the revised action plan on 29th September 2020. After the letter dated 28th September, 2020, the Respondent did not write to the Claimants subsequent letters and emails. I find that the Respondent themselves contributed to the delays in the progress of work by failing to provide the items enumerated above, and also by the delays in answering requisite correspondence. The Respondent should not rely on the delays in Contract performance caused by their own inefficiency, while closing their eyes to the devastating effects of COVID-l9 to the conduct of business between March 2020 to September 2020 when they purported to terminate the Contract. My findings on the Respondent's act of terminating the Contract while there was no justification for doing so in the light of the effect of COVID-19, and my further findings that the Respondent was responsible for the delayed performance due to their failure to provide some essential services on time (office space, power connection, site handover etc.) coupled with unexplained delays in answering and acting upon correspondence are final. In view of the defaults on the part of the Respondent I find that the Respondent, and not the Claimant was in breach of Contract.”
71. It is this Court’s finding that the above decision by the Arbitrator was consistent with the Public Procurement and Disposal Act, 2015 and the regulations thereunder as well, as a contract that was entered into between the applicant and the respondent herein and the Arbitral Award in that regard cannot be said to be inconsistent with the said laws thereby rendering the Arbitral Award to be inconsistent with the public policy of Kenya.
72. The Court of Appeal in the case of Ann Mumbi Hinga vs Victoria Njoki Gathara (supra) held as follows on the issue of public policy-
“One of the grounds relied on to invite the Superior Courts intervention in not enforcing the award was that of alleged violation of the public policy. Again no intervention should have been tolerated firstly because one of the underlying principles in the Arbitration Act is the recognition of an important public policy in enforcement of arbitral awards and the principle of finality of arbitral awards and secondly although public policy can never be defined exhaustively and should be approached with extreme caution, failure of recognition on the ground of public policy would involve some element of illegality or that it would be injurious to the public good or would be wholly offensive to the ordinary reasonable and fully informed member of the public on whose behalf the State’s powers are exercised …In the arbitration agreement there is an implied agreement between the parties to carry out the ultimate award.”
73. The applicant cited the provisions of Article 10(2)(b) of the Constitution in alleging that the Arbitral Award was lop sided as the respondent was left in possession of the equipment that had been installed by the applicant, yet there was no adequate compensation for the same as the applicant left empty handed from the arbitral proceedings, thus there was no equity in the decision, thereby rendering the said Award to be inconsistent with the Constitution of Kenya. Article 10(2)(b) of the Constitution provides for the national values and principles of governance to include human dignity. equity, social justice, inclusiveness, equality, human rights, non-discrimination and protection of the marginalized.
74. The Supreme Court addressed this point and settled the law in the Nyutu Agrovet vs Airtel Networks Limited [2019] eKLR by pronouncing itself as follows-
“breaches of the Constitution are properly governed by Articles 165(3) and 258 of the said Constitution and cannot by litigational ingenuity be introduced for adjudication by the High Court by way of invocation of Section 35 of the Arbitration Act.”
75. The said allegation is far from the truth as the Arbitrator after finding that the respondent was in breach of contract awarded the applicant special damages that he considered to have been pleaded and proved. It is therefore not true that the applicant left the Arbitration proceedings empty handed. My finding of the Final Arbitral Award was not inconsistent with the Constitution, and as result, rendering it to be inconsistent with the public policy of Kenya. In this Court’s finding, the Arbitrator was a Court of equity, having treated both parties with an equal measure of fairness.
76. Although this Court agrees that the Arbitrator did not address the issue of whether general damages could be awarded for breach of contract, at this juncture, that on its own cannot be a ground for setting aside the Arbitral Award. Both Counsel submitted on the said issue, but this Court will steer clear of determining the said issue on merits, as failure by the Arbitrator to determine the issue would form a ground of appeal on a point of law. In my considered view, it cannot be said to be in conflict with the public policy of Kenya. The refusal by the Arbitrator to rely on the evidence of the Accountant on the projected revenue growth of the project, would also be a ground of appeal and cannot be termed to be to be in conflict with the public policy of Kenya.
77. This Court’s finding is that the application dated 3rd May, 2023 is without merit. It is dismissed with costs to the respondent.
DELIVERED, DATED and SIGNED at NAIROBI on this 1st day of December, 2023. Ruling delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
Mr. Manyara h/b for Mr. Oyugi for the applicant
Mr. Muturi for the respondent
Ms B. Wokabi – Court Assistant.