Background
1. The plaintiff herein filed a suit vide the plaint dated 1st November 2022 arising from a sale agreement dated 21st January 2022 entered into with the defendant, for the sale of a piece of land known as Land Title Number LR NO. 209/20337 (Original No. 209/12404/27) (the suit property). The plaintiff’s suit is for breach of contract in which he sought an order for specific performance, general and special damages as well as costs and interest thereon.
2. The interested party entered appearance and filed its statement of defense dated 14th December 2022 in which it amongst other things denied the jurisdiction of this Honourable Court to hear and determine the dispute.
3. The defendant also entered appearance and filed a Notice of Preliminary Objection dated 2nd February 2023. The objection was premised on the fact that this court lacks jurisdiction to hear and determine the suit as it offends Clause 15 of the Sale Agreement dated 21st January 2022, which contains an Arbitration Clause and that the suit should be struck out.
4. Following the directions of this Court parties filed written submissions which the court has carefully considered alongside the pleadings and the authorities cited by all parties.
Analysis and determination
5. The question that this court must determine is whether the dispute herein ought to be referred to arbitration or whether the court is clothed with jurisdiction to entertain it.
6. By way of context, arbitration as a dispute resolution mechanism is based on autonomy of parties. It is in other words a consensual process in which the source of the arbitrator’s jurisdiction is the arbitration agreement between the parties.
7. So central is the idea of party autonomy in the Arbitration Act that the law provides for a very limited avenue where the court may intervene in matters that are before arbitration. Section 10 of the Act provides that except as provided in the Act, no court shall intervene in matters governed by the Act.
8. It is an essential pre-requisite of the arbitration law in Kenya that parties to a contract can demand to resort to arbitration so long as there is an arbitration agreement between them. It is for the court to give deference to such an agreement.
9. There is no dispute that the agreement between the plaintiff and defendant herein contains an arbitration clause which provides as follows:
Any dispute that may arise between the parties hereto concerning the agreement or the construction thereof shall be settled by the parties through arbitration in accordance with the Arbitration Act (1995) of the Laws of Kenya and the rules of the local chapter of the Chartered Institute of Arbitrators with the Arbitrator thereof being appointed by the Chairman for the time being of the Chartered Institute of Arbitrators. (emphasis mine)
10. As earlier stated, this Court is guided by the clear intention set out by the parties in the Agreement to be bound by the provisions of the Arbitration Act, 1995. Section 6 of the Act provides a clear procedure in which parties should move the court to have a matter referred to arbitration in the following terms: -
(1)A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or otherwise acknowledges the claim against which the stay of proceedings is sought, stay the proceedings and refer the parties to arbitration unless it finds—
(a) that the arbitration agreement is null and void, inoperative or incapable of being performed; or
(b) that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.
(2) Proceedings before the court shall not be continued after an application under subsection (1) has been made and the matter remains undetermined.
(3) If the court declines to stay legal proceedings, any provision of the arbitration agreement to the effect that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings.
11. In Niazsons (K) Ltd vs. China Road & Bridge Corporation Kenya [2001] eKLR the Court of Appeal in furtherance to section 6 of the Act elaborated on the factors that the court will consider in determining an application under this provision. These are:
i. Whether the applicant has taken any step in the proceeding other than the steps allowed by section 6 of the Act;
ii. Whether there are any legal impediments on the validity, operation, or performance of the arbitration agreement; and
iii. Whether the suit indeed concerns a matter agreed to be referred.
12. Besides the argument that the Interested Party is not a party to the arbitration clause, the plaintiff also raises the point that the defendant has not complied with the mandatory requirement under section 6 of the Arbitration Act which requires that an application be made under section 6 should be made not later than the time when that party enters appearance.
13. It is a fact that the Memorandum of Appearance by the defendant was filed on 2nd February 2023. The Notice of Preliminary Objection though dated 2nd February 2023 was not filed until 3rd June 2024. This Court notes that in the intervening period, no other pleadings were filed by the defendant besides the submissions on the preliminary objection. The defendant has not specifically applied for referral of the dispute at arbitration as required under section 6.
14. The jurisprudence on the mandatory nature of section 6 is now well crystalized. In Adrec Limited versus Nation Media Group Limited [2017] eKLR the court stated that: -
“Any party who wishes to take advantage of the arbitration clause in a contract should either at the time of entering appearance or before the entry of appearance make the application for reference to arbitration”
15. Likewise, the Court of Appeal in Charles Njogu Lofty v Bedouin Enterprises Ltd [2005] eKLR dealt with an appeal from the High Court being HCCC No. 1756 of 2000.The court concurred with the decision in Civil Case No. 1756 of 2000 Bedouin Enterprises Ltd. v Charles Njogu Lofty and Joseph Mungai Gikonyo T/A Garam Investments. The Court of Appeal opined that: -
“…Even if the conditions set out in paragraphs (a) and (b) of section 6 (1) are satisfied the court would still be entitled to reject an application for stay of proceedings and referral thereof to arbitration if the application to do so is not made at the time of entering an appearance, or if no appearance is entered, at the time of filing any pleading or at the time of taking any step in the proceedings”.
16. Finally, in Dioceses of Marsabit Registered Trustee v Techno trade Pavilion Ltd, HCCC No. 204 of 2013. The Learned Judge observed thus:-
“Instead of filing its defence to the suit, the Applicant filed the present Application on the 24th June 2013. The Application was, therefore, filed fourteen (14) days after the filing of the Memorandum of Appearance. Section 6(1) of the Act is clear, unambiguous and unequivocal, in that a party applying for a stay of proceedings, shall apply not later than the time when that party enters appearance or files any pleadings. This Application should have been filed on the 10th June 2013 together with the Memorandum of Appearance and not fourteen (14) days later.”
17. I mention these cases as a demonstration of the mandatory requirement under section 6 of the Act. The court is bound to ensure that parties demonstrate their choice of arbitration by filing an application for referral to arbitration at the earliest instance being "not later than the time when that party enters appearance or otherwise acknowledges the claim"
18. This requirement is designed to prevent parties from engaging in court proceedings while simultaneously claiming the right to arbitrate. It ensures that the intent to arbitrate is clear and unambiguous from the outset. The defendant herein has not made an application as required under section 6. Instead, they have chosen to engage in court proceedings by filing the notice of preliminary objection. This action is interpreted by this court as a submission to its jurisdiction and waiver of the right to arbitration.
Disposition
19. The notice of preliminary objection is therefore dismissed with costs to the plaintiff.