Background and Introduction
1. The plaintiff, instituted this suit against the defendant, through a plaint dated 20th December 2024, seeking the following orders;
a) A declaration that the defendant is in breach of the Share Purchase Agreement dated 24th August 2020.
b) An order compelling the defendant to pay to the plaintiff KShs. 17,120,301/= being the balance of the Share Purchase Price.
c) Interest on (b) above at Central Bank Rates of 10% - 12.5% per annum from the date of default of the payment of the Share Purchase Price being 31st August 2020, 28th April 2021 and 31st December 2021 until payment in full.
d) Costs of the suit.
e) Interest on (b) (c) and (d) above from the date of filing the suit until payment in full.
2. The defendant entered appearance and filed a Notice of Preliminary Objection (PO), on 13th February 2024, challenging this court’s jurisdiction, on account of an arbitration clause in the Share Purchase Agreement. He also filed an application dated 22nd March 2024 seeking to stay these proceedings and for referral of the dispute to arbitration. The application is supported by his affidavit sworn on even date and opposed through a replying affidavit sworn on 4th June 2024, by NOREEN WANYOIKE, the plaintiff.
Analysis and Determination
3. The parties also filed their respective composite written submissions, which I have carefully considered alongside the pleadings, evidence, and cited authorities. The main issue for determination is whether this suit should be stayed and the dispute referred to arbitration. However, as a matter of priority, the PO challenges the jurisdiction of this court and as guided by the principle set out in the Owners of the Motor Vessel "Lilian S" v Caltex Oil (Kenya) Ltd [1989] eKLR, if I find that the court lacks jurisdiction, I must lay down my tools. Accordingly, I will begin by addressing the PO.
4. The threshold of what amounts to a PO was laid out in Mukhisa Biscuit Manufacturing Co. Ltd vs West End Distributors Ltd [1969) EA 696. At page 700 Pr. D-F Law JA as he then was had this to say: -
“....A Preliminary Objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court or a plea of limitation, or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration.”
5. Sir Charles Newbold, P. at pg.701 paragraph B-C added;
“A Preliminary Objection is in the nature of what used to be a demurrer. It raises a pure point of law which is usually on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of Judicial discretion....”
6. In summary, it is now well settled that the test for determining whether a PO meets the required threshold is that it must raise a pure point of law, it must assume that all the facts pleaded by the opposing party are correct and no fact should require further ascertainment. As held by the Court of Appeal in Attorney General & another v Andrew Maina Githinji & another [2016] KECA 817 (KLR), all three elements must be present for the PO to be sustained.
7. Following the above discussion, I agree that the defendant’s claim of this court’s lack of jurisdiction constitutes a pure point of law, as outlined in the Mukisa Biscuit case (supra). However, I find that the threshold for sustaining a PO on a point of law has not been fully met. This is because the facts pleaded by the defendant are in dispute. The key issue between the parties is whether they have exhausted all avenues provided under Clause 9 of the Agreement. While the plaintiff asserts that the dispute has moved beyond arbitration, the defendant maintains that it should still be referred to arbitration. The dispute over the facts renders a fatal blow to the defendant’s preliminary objection which is hereby dismissed, with costs, paving way for the determination of the application dated 22nd March 2024.
8. There is no dispute about the existence of the arbitration clause in the Agreement. Clause 9.2 provides as follows;
“Should any dispute arise between the parties with regard to the interpretation, rights, obligations and/or implementation of any one or more provisions of this Agreement, the parties shall in the first instance attempt to resolve such dispute by amicable negotiation. In the event that an amicable solution is not reached therein, the parties agree to refer the matter to an arbitrator to be agreed upon by both parties, or failing such agreement, the dispute shall proceed to the courts of law in Kenya”. (Emphasis mine).
9. This court has consistently emphasized the importance of party autonomy in arbitration proceedings. Judicial precedents reaffirm that courts must uphold contractual terms that provide for arbitration and, as a matter of course, respect the parties' agreement to honor their chosen dispute resolution mechanism.
10. In this case, the parties expressly outlined their preferred dispute resolution process and the terms surrounding the process. Where such an intention is unequivocal, the court's role is clear: to enforce the parties' agreement rather than to rewrite its terms. (See: National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] eKLR).
11. From the correspondence provided by the plaintiff (pages 9 to 21 of the annexures to the replying affidavit), it is evident that a dispute arose between the parties concerning outstanding dues of KShs. 21,664,294 under the Agreement. The plaintiff sought to have the matter resolved amicably, and the parties engaged in negotiations through their respective counsels, in an attempt to reach a settlement. However, these efforts ultimately failed, leading the plaintiff to formally declare a dispute on 4th October 2023 as per the dispute resolution mechanism outlined in the agreement.
12. Further evidence indicates that, following the declaration of a dispute, the parties attempted to initiate arbitration but were unable to agree on the selection of arbitrators to hear and determine the matter. This deadlock effectively stalled the arbitration process, leaving the plaintiff with no alternative but to seek redress before this court, as provided for and anticipated by the parties, under the arbitration clause.
13. Given these facts, I am persuaded that the matter now properly falls within this court’s jurisdiction for determination. The defendant, having opposed the plaintiff’s proposed arbitrators and failed to advance an alternative solution that would allow arbitration to proceed, cannot now turn around and argue that the dispute should still be subjected to arbitration. To do so would be contrary to the principles of efficient dispute resolution under arbitration. The dispute resolution clause in the Share Purchase Agreement was not intended to serve as a tool for delaying justice or frustrating a party’s right to legal recourse.
Disposition
14. Accordingly, the application dated 22nd March 2024 seeking to stay the proceedings in this suit and for referral of the dispute to arbitration is also dismissed with costs.
DATED, SIGNED AND DELIVERED IN MOMBASA
THIS 16TH DAY OF APRIL 2025
F. MUGAMBI
JUDGE
1. The plaintiff, instituted this suit against the defendant, through a plaint dated 20th December 2024, seeking the following orders;
a) A declaration that the defendant is in breach of the Share Purchase Agreement dated 24th August 2020.
b) An order compelling the defendant to pay to the plaintiff KShs. 17,120,301/= being the balance of the Share Purchase Price.
c) Interest on (b) above at Central Bank Rates of 10% - 12.5% per annum from the date of default of the payment of the Share Purchase Price being 31st August 2020, 28th April 2021 and 31st December 2021 until payment in full.
d) Costs of the suit.
e) Interest on (b) (c) and (d) above from the date of filing the suit until payment in full.
2. The defendant entered appearance and filed a Notice of Preliminary Objection (PO), on 13th February 2024, challenging this court’s jurisdiction, on account of an arbitration clause in the Share Purchase Agreement. He also filed an application dated 22nd March 2024 seeking to stay these proceedings and for referral of the dispute to arbitration. The application is supported by his affidavit sworn on even date and opposed through a replying affidavit sworn on 4th June 2024, by NOREEN WANYOIKE, the plaintiff.
Analysis and Determination
3. The parties also filed their respective composite written submissions, which I have carefully considered alongside the pleadings, evidence, and cited authorities. The main issue for determination is whether this suit should be stayed and the dispute referred to arbitration. However, as a matter of priority, the PO challenges the jurisdiction of this court and as guided by the principle set out in the Owners of the Motor Vessel "Lilian S" v Caltex Oil (Kenya) Ltd [1989] eKLR, if I find that the court lacks jurisdiction, I must lay down my tools. Accordingly, I will begin by addressing the PO.
4. The threshold of what amounts to a PO was laid out in Mukhisa Biscuit Manufacturing Co. Ltd vs West End Distributors Ltd [1969) EA 696. At page 700 Pr. D-F Law JA as he then was had this to say: -
“....A Preliminary Objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court or a plea of limitation, or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration.”
5. Sir Charles Newbold, P. at pg.701 paragraph B-C added;
“A Preliminary Objection is in the nature of what used to be a demurrer. It raises a pure point of law which is usually on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of Judicial discretion....”
6. In summary, it is now well settled that the test for determining whether a PO meets the required threshold is that it must raise a pure point of law, it must assume that all the facts pleaded by the opposing party are correct and no fact should require further ascertainment. As held by the Court of Appeal in Attorney General & another v Andrew Maina Githinji & another [2016] KECA 817 (KLR), all three elements must be present for the PO to be sustained.
7. Following the above discussion, I agree that the defendant’s claim of this court’s lack of jurisdiction constitutes a pure point of law, as outlined in the Mukisa Biscuit case (supra). However, I find that the threshold for sustaining a PO on a point of law has not been fully met. This is because the facts pleaded by the defendant are in dispute. The key issue between the parties is whether they have exhausted all avenues provided under Clause 9 of the Agreement. While the plaintiff asserts that the dispute has moved beyond arbitration, the defendant maintains that it should still be referred to arbitration. The dispute over the facts renders a fatal blow to the defendant’s preliminary objection which is hereby dismissed, with costs, paving way for the determination of the application dated 22nd March 2024.
8. There is no dispute about the existence of the arbitration clause in the Agreement. Clause 9.2 provides as follows;
“Should any dispute arise between the parties with regard to the interpretation, rights, obligations and/or implementation of any one or more provisions of this Agreement, the parties shall in the first instance attempt to resolve such dispute by amicable negotiation. In the event that an amicable solution is not reached therein, the parties agree to refer the matter to an arbitrator to be agreed upon by both parties, or failing such agreement, the dispute shall proceed to the courts of law in Kenya”. (Emphasis mine).
9. This court has consistently emphasized the importance of party autonomy in arbitration proceedings. Judicial precedents reaffirm that courts must uphold contractual terms that provide for arbitration and, as a matter of course, respect the parties' agreement to honor their chosen dispute resolution mechanism.
10. In this case, the parties expressly outlined their preferred dispute resolution process and the terms surrounding the process. Where such an intention is unequivocal, the court's role is clear: to enforce the parties' agreement rather than to rewrite its terms. (See: National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] eKLR).
11. From the correspondence provided by the plaintiff (pages 9 to 21 of the annexures to the replying affidavit), it is evident that a dispute arose between the parties concerning outstanding dues of KShs. 21,664,294 under the Agreement. The plaintiff sought to have the matter resolved amicably, and the parties engaged in negotiations through their respective counsels, in an attempt to reach a settlement. However, these efforts ultimately failed, leading the plaintiff to formally declare a dispute on 4th October 2023 as per the dispute resolution mechanism outlined in the agreement.
12. Further evidence indicates that, following the declaration of a dispute, the parties attempted to initiate arbitration but were unable to agree on the selection of arbitrators to hear and determine the matter. This deadlock effectively stalled the arbitration process, leaving the plaintiff with no alternative but to seek redress before this court, as provided for and anticipated by the parties, under the arbitration clause.
13. Given these facts, I am persuaded that the matter now properly falls within this court’s jurisdiction for determination. The defendant, having opposed the plaintiff’s proposed arbitrators and failed to advance an alternative solution that would allow arbitration to proceed, cannot now turn around and argue that the dispute should still be subjected to arbitration. To do so would be contrary to the principles of efficient dispute resolution under arbitration. The dispute resolution clause in the Share Purchase Agreement was not intended to serve as a tool for delaying justice or frustrating a party’s right to legal recourse.
Disposition
14. Accordingly, the application dated 22nd March 2024 seeking to stay the proceedings in this suit and for referral of the dispute to arbitration is also dismissed with costs.
DATED, SIGNED AND DELIVERED IN MOMBASA
THIS 16TH DAY OF APRIL 2025
F. MUGAMBI
JUDGE