Glencore Grain Ltd v TSS Grain Millers Ltd

High Court, at Mombasa

July 5, 2002

Onyancha J

Civil Suit No 388 of 2000

Arbitration – arbitral award – enforcement of award – application for leave to enforce an arbitral award – failure to state grounds of application to be supported by an affidavit – consequences of non-compliance with the rule - Civil Procedure Rules order 50 rule 7.

Arbitration – arbitral award–– failure to serve award – proper service of arbitral award – requirement that arbitral award must be authenticated or in its original form - Arbitration Act 1995 section 36(2).

Arbitration ––arbitral tribunal – powers of tribunal – authority and jurisdiction of court visa a vis the arbitral tribunal – matters properly before an arbitral tribunal that court has no jurisdiction

Arbitration ––arbitrators – authority to select arbitrators–– selection contrary to the mandatory provisions of section 37(1) (a) (iii) of the Arbitration Act 1995

Arbitration ––arbitral award – enforcement of award – where award is illegal, void immoral and against Kenyan policy – jurisdiction of court to question an arbitral award on issues concerning public policy.

Stamp Duty –– instruments chargeable with stamp duty – failure to have instruments duly stamped as required by the Stamp Duty Act (cap 480) section 23, 20 & 21 – consequences of such failure.

Civil Practice and Procedure ––adjournment of suits–– discretion of the courts in granting or dismissing application for adjournment – guiding principles.

Public Policy –– safeguarding public policy by the courts – court declining to enforce arbitral award which would result in the release of unhealthy food products to the public.

The applicant had originally filed an application seeking leave to enforce an international arbitral award as if it were a decree of the court under section 36 of the Arbitration Act. The respondents sought orders challenging enforcement of the arbitral award and setting it aside altogether. The respondents argued inter alia, that the arbitral award was based on an amended contract that was not agreed on by the parties, that the arbitral award dealt with issues not provided in or contemplated by the contract; and that the applicant did not show to be basing its application upon any grounds as required under order 50 rule 7 of the Civil Procedure Rules and that the arbitral award had been filed out of time. The respondent sought an adjournment after the applicant had completed its submissions. The adjournment was opposed and the court gave its decision.

Held:

 1. The respondents were not served with a copy of the arbitral award until 13/9/2000 and they were therefore not out of time when they filed the application challenging the award on 22nd September, 2000.

2. An application for leave to enforce an award such as the one under consideration like any other must generally state the grounds of the application to be supported by an affidavit bearing the facts or evidence upon which it is based. The applicant’s application was accordingly not based on any facts or evidence as it should under order 50 rule 7.

3. The application was not supported by a valid affidavit and should be dismissed.

4. The requirements under order 50 rule 7 of the Civil Procedure Rules are mandatory. Applications for enforcement of an arbitral award must be on grounds required by Order 50 rule 7. Even if the affidavit were found present and proper, the omission to ground the application would be fatal and incurable.

5. Applications under section 36 of the Arbitration Act shall be in made by summons in chambers.

6. The arbitral award herein was not filed in its original form nor was it authenticated as required by section 36(2) (b) of the Arbitration Act. The failure to comply with the Act was fatal, rendering the arbitral award inadmissible in evidence for the purpose of recognition and or enforcement.

7. The failure to include the arbitration rules to the arbitration agreement and award was fatal to the application and rendered the arbitral award unenforceable.

8. It is not open to this court to determine upon an issue which was properly before an Arbitral tribunal and in respect of which this court has no jurisdiction.

9. The Stamp Duty Act (cap 480) Section 23 and 19 required the court not only to authorize and mandate the court to refuse the arbitral award recognition and enforcement but also not to use them for any purpose, not to allow it be filed or registered, not to receive it in evidence in Civil proceedings and not to act upon them in any way.

10. The Stamp duty Act Section 19 and 23 are provisions of general application except where they are expressely excluded and they are not so excluded by the Arbitration Act.

11. Gafta had no authority to select an arbitrator or two arbitrators on behalf of TSS Millers Ltd and doing so as Gafta did was contrary to the mandatory provisions of section 37(1) (a) (iii), and consequently rendered the award not recognizable and not enforceable within the section.

12. The courts could not be used to enforce the arbitral award the subject of these applications, which were illegal or void or immoral therefore against the public policy of Kenya.

13. Although it is Kenya’s public policy to enforce international Arbitral treaties and agreements, the court must balance the competing rights; the public policy in protection of matters in favour of international arbitral awards, contracts or judgments and public policy in protection of matters more favourable to the welfare of Kenyan people.

14. The contract or award herein whose effect would be to release to the public maize unfit for human consumption would itself be tortious as well as illegal and accordingly the transaction or contract would be against Kenya’s public policy.

15. The court did not have jurisdiction to consider and determine the contractual issues arising. Under ordinary circumstances the court may not have legal authority to question the arbitral award made by the tribunal, but in issues concerning public policy of Kenya, this court had authority.

16. In matters that touch on public policy, this court will have authority to examine the award even at the stage of enforcement to determine whether or not the Arbitral Tribunal had jurisdiction in respect of the disputes relating to the underlying contract.

17. The court cannot enforce an award arising from what it has found to be an award in respect of an illegal or tortious or immoral contract within the meaning of the words as used in respect to such contracts relating to or against public policy.

Application to the court to accept the arbitration award as a decree of the court refused. Application to reflect the arbitral award and set it aside allowed.

Cases

1. Wahinya v Wahinya [1976] KLR 96

 2. Ngugi, Ngigi v Njenga Waweru [1979] KLR 254

3. Furtado v Rovers [1802] 3 Bos & P 191 at 198 4. Scott v Brown [1892] 2 KB 724

5. Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd & others  [1998] 4 All ER 570

Statutes

1. Arbitration Act (Act No 4 of 1995) sections 3(1),(6); 4(2); 9(1)(2),(2); 11; 12; 32(4), (5); 36(1), (2), (2)(a), (2)(b); 37(1)(a)(iii)

2. Arbitration Rules 1997 (Act No 4 of 1995 Sub Leg) rules 4(1), 9

3. Civil Procedure Rules (cap 21 Sub Leg) order XVII rules 1, 2; order L rules 1, 3, 7

4. Stamp Duty Act (cap 480) sections 19, 23

5. Evidence Act (cap 80) sections 2(1), 64, 66, 67, 68(1)(e), (f)

Advocates

Mr Khanna for the Applicant

Mr Adera for the Respondent