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Tumaz & Tumaz Enterprises Limited v Oliver Chapa Chonga & another (Miscellaneous Civil Application E106 of 2021) [2022] KEHC 13763 (KLR) (7 October 2022) (Ruling)
Neutral citation:
[2022] KEHC 13763 (KLR)
Republic of Kenya
Miscellaneous Civil Application E106 of 2021
WM Musyoka, J
October 7, 2022
Between
Tumaz & Tumaz Enterprises Limited
Applicant
and
Oliver Chapa Chonga
1st Respondent
Mwasaha Mwangodza T/A Aquascapes Consulting
2nd Respondent
Ruling
1.The summons dated July 14, 2021 is at the instance of Tumaz & Tumaz Enterprises Limited, who I shall refer hereto as the applicant. It seeks that the arbitral award published by the Honourable P Mwaniki Gachoka, arbitrator, on April 19, 2021, be set aside. The alternative prayer is that directions or orders be made that the award be remitted to the arbitrator for corrective measures or reconsideration to eliminate the grounds for setting it aside.
2.The grounds on which the summons is predicated are:a.That the applicant was not given proper notice of appointment of the arbitrator or the arbitral proceedings, or was unable to present its case;b.That the award, the proceedings and the reasons for the decisions display lack of fairness and bias on the part of the arbitrator to the disadvantage and incapacity of the applicant;c.That the award deals with issues not contemplated by and not falling within the terms of reference to the arbitrator;d.That the arbitrator went beyond the scope of the reference;e.That the award is in conflict with public policy;f.That the award is imperfect in form and contains obvious errors on its face;g.That the award left undetermined matters referred to arbitration and determined matters not referred to arbitration;h.That the arbitrator was guilty of misconduct;i.That the respondents fraudulently concealed matter which ought to have been disclosed, and willfully misled and deceived the arbitrator;j.That the arbitrator failed to determine the real issues in controversy between the parties, and neglected evidence and materials placed before him;k.That the award was bad in law, illegal, misleading and contradictory, and shows open bias by the arbitrator; andl.That the respondents had attempted to enforce the award in a manner that was contrary to the provisions of the Arbitration Act, No 4 of 1995, Laws of Kenya.
3.The factual background is given by Julius Mwale, a director of the applicant, vide an affidavit sworn on July 12, 2021. He avers that the parties had entered into a contract for delivery of golf holes. What is in dispute is how many holes the respondents were contracted to deliver, and whether the works were performed to completion and satisfaction of the applicant. He gives a list of the grievances that the applicant placed before the arbitrator. He also deposes on the grounds on the face of the application. On the non-issuance of proper notice on appointment of the arbitrator, he asserts that the applicant was not issued with a proper notice, and, therefore, the arbitrator had no jurisdiction to determine the matter. He says that the respondents did not give a written notice under section 17.1 of the agreement, and the 60 days grace period for the parties to attempt to solve any dispute. It is averred that the condition precedent for reference to arbitration under the arbitral agreement were not satisfied, and the award cannot be enforced in the circumstances. It is asserted that no dispute had arisen within the stipulated 60 days period. It is also averred that both parties did not mutually appoint a sole arbitrator, and the applicant only became aware of the appointment when it was invited for the preliminary meeting of April 12, 2019. It is further averred that the proper arbitral procedure was disregarded, and the arbitral proceedings contravened the agreement between the parties.
4.On the proceedings and reasons for the decision displaying bias, it is averred that the arbitration disregarded agreement by the parties to appoint a quantity surveyor to conduct a joint inspection, and ignored a report on survey and valuation for work done. The arbitrator is accused of refusing to admit evidence, and of applying strict rules of procedure. It is asserted that the arbitrator gave the respondents an unfair advantage over the applicant. He acted partially by finding the applicant in breach of contract by failing to finance the project as stipulated in the contract, by relying on documents that were not duly executed or were incomplete or tampered with , whilst where the respondents were guilty of the same the arbitrator chose not to rely on their documents; the arbitrator stated that the completion date for Hole 4 was within 45 days and the respondents had completed the works within 30 days when there was no such evidence. He states that the Local Purchase Order (LPO) did not provide for a completion date, and argues that where an agreement does not give such a completion date, then equity requires that time be made of the essence before the contract can be rescinded or treated as breached. He avers that the arbitrator did not refer to nor consider witness statements and other documentary evidence presented by the applicant. He avers that the respondents did not present any evidence that they were required to maintain the golf holes past the contract period. It is also averred that the arbitrator disregarded the rule of evidence relating to proof. The arbitrator is also accused of shifting the burden of proof and of determining matters that were not pleaded.
5.On the award dealing with matters that were not contemplated under the contract., it is averred that the award of Kshs 13, 354, 240.00 and Kshs 400, 000.00 supposedly deposited in to a bank account, were beyond the scope of the dispute contemplated in the LPO. The arbitrator is accused of exceeding jurisdiction, relying on documents that were tampered with or unclear or blurred or uncertified, among others, relying on a verbal contract, deliberating on matters not referred to arbitration as contemplated by Order 46 Rule 14(a) of the Civil Procedure Rules and leaving certain matters undetermined. On the award being in conflict with public policy, it is averred that the same encourages unjust enrichment, for there was no justification for the awards made. It is also averred that the arbitrator was selective on the evidence on which he based the award, and gave no reasons for discounting or dismissing the evidence incorporated in the agreement. On the award containing obvious errors, it is averred that the award was imperfect in form, contained obvious errors, on grounds that the arbitrator granted an unfair advantage and benefit to the respondents by ordering the refund of Kshs. 400, 000.00, when that amount was not contractual. It is averred that the arbitrator relied on an agreement executed by one party only, and did not assign reasons for his decision or award. On the arbitrator being guilty of misconduct, it is averred that he failed to appreciate that the strict rule of evidence were excluded from arbitration proceedings, failed to determine the real issues in controversy, neglected evidence and materials placed before him, failed to evaluate evidence, applied reverse reasoning intentionally picking facts and evidence favourable to the respondents and ignored credible and admissible evidence adduced by the applicant, rewrote the agreement for the parties, the award was inimical to the Constitution and the Arbitration Act.
6.The deponent of the affidavit has attached a bundle of documents that support the applicant’s case.
7.The reply to the application is vide an affidavit, sworn by Oliver Chapa Chonga, on September 27, 2021. He avers that the applicant was predicated on the provisions of the Civil Procedure Act, Cap 21, Laws of Kenya, and the Civil Procedure Rules, which were inapplicable, instead of section 10 of the Arbitration Act. He explains that the applicant had engaged the respondents to pursuant to an agreement for provision of landscaping and construction of golf holes at Mwale Medical and Technology City, Butere, whose terms were set out in LPOs dated October 9, 2017 and January 7, 2018, and it was agreed that the applicant would pay for the same on completion of each golf hole constructed and maintained for a period of 30 days. It is averred that the respondents discharged his obligations, by constructing the first golf hole to completion. The respondents stopped construction of the second hole, when 80% complete, on account of default by the applicant to pay for the works done. The respondents declared a dispute, invoked the arbitration clause in 17.1 of the agreement and called for a meeting to resolve the matter on the outstanding payments. At the meetings, where the applicant was represented by Daniel Knox, the applicant promised to settle the outstanding bills, but did not honour the promises. The applicant requested the respondents to deposit Kshs 400, 000.00 as security, to convince sponsors or financiers in the United States of America to fund construction of the remaining holes. The respondents made the deposit, but the financing promised never happened. When the promises were not fulfilled, the respondents caused its Advocates to send demand notices to the applicant, but the applicant still did not heed. Thereafter, the respondents wrote to the applicant, asking it to agree and appoint a mutual arbitrator. The respondents proposed appointment of Mr. Allen Gichuhi, or to let the Chair of the Chartered Institute of Arbitrators to appoint one. The applicant proposed that the Chair appoints an arbitrator, whereupon the respondents wrote to the Chair in that behalf. The Chair asked the parties to pay the appointment fees, which the respondents paid. Subsequently, the Chair of the Chartered Institute of Arbitrators appointed Mr Mwaniki Gachoka, as sole arbitrator, and notified the parties. The arbitrator accepted the appointment, and invited the parties to a preliminary meeting, which was attended by the Advocates for both sides. It is averred that the applicant and his Advocate agreed on the appointment of the arbitrator, and agreed on the rules of engagement. It is also averred that the applicant and his Advocates participated in the proceedings. It is further averred that the applicant filed a defence, and even engaged Francis Sitati, a civil engineer, to represent it, to determine the value of the work done by the respondents. At the conclusion of the hearings, the applicant filed written submissions. It is stated that the arbitrator framed issues, which he proceeded to determine, after the same were comprehensively canvassed upon by the parties. It is averred that the arbitrator analyzed the evidence and gave a reasoned a determination. It is averred that the application is a disguised appeal. The deponent has attached a bundle of the documents that he relies upon to agitate the respondents’ case.
8.Direction were given on September 28, 2021, for canvassing of the application by way of written submissions. Both sides have filed their respective written submissions, which I have read through and noted the arguments made. Those by the applicant are dated February 14, 2022, while those by the respondents are dated December 17, 2021. Both sides have cited various decisions, which I have also read through.
9.The starting point should be by way of pointing out that an application to set aside an arbitral award does not constitute the High Court an appellate court. It was stated in Mahican Investments Limited & 3 others v Giovanni Gaida & 80 others [2005] eKLR (Ransley J), that a court will not interfere with the decision of an arbitrator even if it is apparently a misinterpretation of a contract as this is the role of the arbitrator, to interpret contracts. To interfere, the court said, would amount to placing the High Court in the position of a court of appeal, which is the whole intent of the Arbitration Act to avoid, for the purpose of the Arbitration Act is to bring finality to disputes between the parties. So, in determining the matter before me, I shall be cautious to avoid acting as if I am sitting on appeal on the decision of the arbitrator.
10.On the issue as to whether the applicant was issued with a proper notice of appointment of arbitrator, I have noted, from the record, that the applicant was, throughout the arbitral proceedings, represented by an Advocate, right from the preliminary meeting. The firm of Matete Mwelese & Company, Advocates, confirmed the appointment of the arbitrator by the applicant, and actively participated in the arbitral proceedings, without raising any issues at all about the manner of appointment of the arbitrator. The said Advocates did not mount a challenge, at the High Court, in the course of the arbitral proceedings, on the appointment and to seek removal of the arbitrator. The applicant cannot now, at the conclusion of the arbitral proceedings and pronouncement of the award, turnaround and begin to raise issues about the appointment of the arbitrator. If any ground existed then, for challenging the appointment, the applicant ought to have raised at the time, and by participating in the proceedings it acquiesced to the said appointment, and the principles of acquiescence and estoppel would apply.
11.On the second issue, as to whether the award, proceedings and the reasons for the decision display lack of impartiality, unfairness and bias on the part of the arbitrator, I will start by considering what bias and impartiality is about. I find guidance in Zadock Furnitures Systems Limited & another v Central Bank of Kenya [2014] eKLR (Gikonyo, J), where it stated that the test of bias or prejudice is that there should be real danger that the arbitrator is biased, and which bias is tested and determined through the court personifying the reasonable man, and considering all the material before it. It was cautioned that the applicants often package the challenge to arbitral awards in a language that appears flowery and powerful, with the actual grounds themselves being weak. The court was urged to be careful, for trivial issues could be projected as real and substantial. It was stated that the appropriate test should be that the lack of impartiality and independence of the arbitrator ought to be manifest and almost certain as opposed to a mere possibility, when all the circumstances of the case are considered.
12.There are several aspects to that issue. There is the question of the appointment by consent of a quantity surveyor to conduct a joint inspection of the site. The arbitrator is also said to have disregarded the report sought to be relied on by the applicant. It also said that the applicant had given indication that it was arranging to have survey works done. The applicant further complains about the arbitrator applying the strict rules of evidence, and of denying the applicant a chance to have another report produced, as it would appear that its Advocates on record did not get a surveyor to do survey works and procure a report to be placed on record. I will deal with these issues separately.
13.I will start with the whether the arbitrator disregarded the report that was placed on record. The parties, particularly, the applicant, being the initiator of these proceedings, has not done any justice to the proceedings. I have carefully perused and scoured through the file of papers before me, and I have not come across a transcript of the proceedings that were conducted before the the arbitrator, for all I can see are copies of the pleadings by the parties, the witness statements and the final award. There is no record of who testified, when they testified and what they said before the arbitrator. The record of the proceedings is critical, for it is from it that a court assesses what actually transpired before the tribunal, from which then it can evaluate the proceedings to answer the questions raised in the application as to the propriety of the said proceedings. Without copies of the proceedings or a transcript thereof, it would be difficult for me to determine whether the arbitrator was biased or partial, or whether he engaged in misconduct. There are only two documents on record which give some inkling as what transpired before the arbitrator, that is the Order for Directions No 5 and the Order for Directions No 6, relating to proceedings that were conducted on November 13, 2019 and December 4, 2019, respectively. Nothing of significance happened on both dates, as the matter was adjourned, on both dates, on account of the non-attendance of Mr Matete, Advocate, for the applicant herein, and of the witnesses for the applicant. There is no record relating to the dates when evidence was taken from the witnesses called by the applicant and for the respondents. I have, therefore, no way of assessing or conducting a review of the proceedings in the award and the final determination, as against what transpired at the hearing. As it is I can only go by what has been placed on record before me.
14.From the final award it appears that the applicant called one witness, who testified on a date that is not mentioned in the award. He is identified as Francis Sitati. There is a narration, in summary, at paragraph 12 of the award, of what he informed the arbitrator. That he was a civil engineer and not a quantity surveyor, that he visited the subject premises for inspection and prepared a report, which showed the level of completion of the first golf hole to be 50.288% and 3.577% for the second hole, and that the reports he presented in court were not signed. In the award the arbitrator evaluated that evidence and made conclusions as follows:
15.The report that the applicant submits the arbitrator disregarded was that which Mr. Sitati uttered. It was an unsigned document. An unsigned document cannot possibly be of any probative value, for what authenticates a document and gives it legitimacy is the signature. Execution of the document means that the person uttering it gives it ownership and reliability. This is elementary evidence law, that should apply to any proceedings, whether before a court of law, a tribunal, an arbitrator or a sub-locational Assistant Chief. The fact that proceedings before tribunals, arbitrators or other alternative justice systems are designed to be less formal, in comparison with court proceedings, does not do away with the basic rules of evidence, such as the probative value of unexecuted documents. An unsigned document is worthless.
16.Secondly, the person who was uttering that worthless document was being presented as an expert witness, to bespeak the contents of a document prepared with respect to survey works. His witness statement, placed on record in this matter, was not signed by that witness, that is to say Francis Sitati. In it, he claims to be a quantity surveyor, complete with a quantity surveyor registration number. He states that he was contracted by the applicant to undertake survey works to assess the work done, and concluded that the work was not done to completion. He states that he had prepared two reports on the work allegedly done by the respondents. According to the award, when the said witness, Francis Sitati, testified before the arbitrator, he said he was not a quantity surveyor, but a civil engineer. That meant that he was not an expert on what he was testifying on. It also called into question his credibility, for he had filed a witness statement, its non-execution by him notwithstanding, claiming to be one thing, but when he appeared before the arbitrator he claimed to be something totally different. Surely, little credibility can be assigned to such a witness, and it is little wonder, therefore, that the arbitrator did not believe him.
17.Although the arbitrator is accused of bias and misconduct, the record before me indicates that he in fact, without prompting from the parties, went out of his way to urge them to have the premises jointly surveyed and inspected. That suggestion was made after the respondents closed their case, and before the applicant presented his. It was made because the matter had seemingly stalled, and the arbitrator was nudging the parties to conclude it by way of conducting a mutual inspection of the works. The applicant did not take advantage of that window, and I find ironic, therefore, that the applicant is accusing the arbitrator of not allowing that mutual inspection to be conducted, when the arbitrator had given a chance to the applicant and the respondents to carry out the joint inspection works, but no action was taken due to noncooperation by the applicant. For avoidance of doubt, this is what is recorded by the arbitrator in Order for Directions No. 5:
18.The other thing that I have noted from the meagre record that the applicant has placed before me, particularly the two orders for directions, cited above, is that the matter dragged on for quite some time because on non-attendance by the advocates for the applicant and its witnesses, on the dates appointed for hearing. The arbitrator adjourned the matter to accommodate the applicant, and the suggestion that the two parties pursue a joint effort to survey and inspect the premises was made in frustration after the matter stalled, and it was only after the applicant neglected that suggestion that the arbitrator directed that the applicant proceeds, whereupon it called the witness who recanted the contents of his witness statement on his profession and produced an unsigned document. The arbitrator literally bent backwards to accommodate the applicant.
19.The last issue concerns the request by the applicant, through the advocates who took over the matter from its previous advocates, to have the survey works done. That request was being made after the arbitral proceedings had been concluded, and upon the arbitrator giving notice of the reading or publication of the award. Surely, this was coming too late in the day, in view of what I have discussed above. The arbitrator cannot be faulted for declining to entertain the applicant further, and the claim of bias or misconduct on that account would have no basis, in the circumstances. The applicant had had the opportunity to do the right thing, as stated above, but did not take advantage of the chances that were availed to it.
20.Overall, therefore, there is no merit in the ground that the arbitrator was biased or unfair or partial.
21.On whether the award deals with matters not contemplated under the contract, I will cite the decisions in Mahican Investments Limited & 3 others v Giovanni Gaida & 80 others [2005] eKLR (Ransley, J) and Synergy Credit Limited v Cape Holdings Limited [2020] eKLR (M’Inoti, Sichale & J Mohammed, JJA). In Mahican Investments Limited & 3 others v Giovanni Gaida & 80 others [2005] eKLR (Ransley J), it was stated that for a party to succeed on that ground, it must be shown, beyond doubt, that the arbitrator had gone on a frolic of his own and dealt with matters not related to the dispute. In Synergy Credit Limited v Cape Holdings Limited [2020] eKLR (M’Inoti, Sichale & J Mohammed, JJA), it was said that in determining whether the arbitrator dealt with a dispute not contemplated or falling within the terms of reference, or whether the award contains decisions on matters beyond the scope of the refence to the arbitrator, the arbitral clause or agreement is critical. Other considerations would be the pleadings and submissions of the parties, and the conduct of the parties in the arbitration.
22.The argument is that the award of Kshs 13, 354, 240.00 for the works allegedly done and Kshs 400, 000.00 allegedly deposited in the bank account of the applicant was beyond the scope of the dispute. It is argued that the arbitrator determined issues outside the scope of the declared dispute, by relying on tampered documents, blurred pictures, documents marked as drafts and on an oral contract. For the purpose of determining this ground, a consideration of the arbitral clause or agreement, and the pleadings, submissions and conduct of the parties is critical. The arbitral clause, clause 17.1, reads as follows:
23.The clause talks about a “… dispute, controversy or claim arising out of or relating to this LPO.” The LPO was about bills with relation to the works done in the construction of the golf holes. The claim by the respondents was for the works done. It valued the same at Kshs 13, 354, 240.00 that would place it squarely within the dispute. Kshs 400, 000.00 was moneys deposited into an account of the applicant, at its request, allegedly to enable convince alleged donors. It would appear that the sum of Kshs 400, 000.00 was not a payment as per the terms of the contract, but rather a side contract, although allied to the principal contract. It was not negotiated as part of the principal contract, and therefore, it is not part of the LPO, and the issue relating to its reimbursement was not part of the dispute that the parties could place before the arbitrator under clause 17.1.
24.On the documents presented as evidence by the respondents, let me start by repeating what I have stated above, that the applicant has not placed before me a full transcript of what transpired before the arbitrator. There is no record of the proceedings, when the witnesses for both sides testified. I presume that they were cross-examined, during which the documents that they sought to rely on ought to have been impeached. There was opportunity for filing of written submissions, that was the stage at which the applicant ought to have raised issue with the integrity of the documents that the respondents relied on. These are matters of evidence which ought not be raised before me, for the matter is neither being relitigated before me, neither is it on appeal. These are matters that were within the jurisdiction of the arbitrator to determine.
25.Regarding the award being in conflict with public policy, it was said, in Christ for All Nations v Apollo Insurance Company Limited [2002] eKLR (Ringera, J), that an award could be set aside, under section 35(2) (b)(ii) of the Arbitration Act, for being inconsistent with the public policy of Kenya, if shown that it was either inconsistent with the Constitution of Kenya, or with any written or unwritten law of Kenya, or inimical to the national interest of Kenya, or contrary to justice and morality. In Mall Developers Limited v Postal Corporation of Kenya [2014] eKLR (J Kamau, J), it was said that public policy connotes national interest, and was not limited to just fairness and justice, for where the arbitration is between two individuals or private entities, the issue of national interest would not arise. It was pointed out that it ought to be demonstrated that the decision of the arbitrator adversely or negatively affected or impacted or infringed the rights of third parties and, as a consequence, offended public policy. The decision in Glencore Grain Ltd v TSS Grain Millers Ltd [2002] 1 KLR 606 (Onyancha, J), emphasized on the immorality and illegality of the decision, in the sense of violating, in a clear and unacceptable manner, the basic legal or moral values of the Kenyan society, by way of offending the conceptions of justice in Kenya, if the enforcement of the award would be offensive.
26.I have read through the award of the arbitrator over and over, as against the submissions by the applicant, and I have not seen anything that would suggest that the same is against public policy, or is immoral or illegal. The respondents were claiming that they completed works as per the contract, but the applicant did not fulfil its part of the bargain, hence the proceedings. Arbitral proceedings were conducted, in which both sides participated, and the arbitrator came up with an award based on the evidence that was presented. No irregularity has been demonstrated, with respect to how the proceedings were conducted, and there is nothing irregular about the award, save for the sum of Kshs 400, 000.00.
27.On whether the arbitrator was guilty of misconduct, I cite Williams v Wallis & Cox [1914] 2 KB (Lush, J), where it was said that misconduct does not necessarily refer to personal misconduct. It was explained that it includes or connotes conduct where the arbitrator declines to adjudicate upon the real issues before him, or rejects evidence which would have been vital to determine to assist him decide on the issue at hand. The issues around misconduct are somewhat tied up with bias, partiality and unfairness. I have addressed these above, and I have stated that nothing was placed on record to demonstrate any sort of misconduct by the arbitrator. If anything, he went out of his way to accommodate the applicant, even when it was clear that the applicant was stalling or delaying the process.
28.Overall, I am not persuaded that the applicant has established existence of grounds which would justify the setting aside of the arbitral award in this case, save to the limited extent of Kshs 400, 000.00. Consequently, there is no merit in the application dated July 14, 2021, and I hereby dismiss the same, with costs.
DELIVERED, DATED AND SIGNED IN OPEN COURT AT KAKAMEGA ON THIS 7th DAY OF OCTOBER 2022WM MUSYOKAJUDGEErick Zalo, Court AssistantMr. Mulama, instructed by Javier Georgiadis & Silvester, Advocates for the applicant.Mr. Shivega, instructed by Daniel & Kenneth, Advocates for the respondents.
