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CM Construction (EA) Limited & another v Junction Apartments Limited & 2 others (Miscellaneous Civil Application E019 of 2022 & Commercial Case E030 of 2021 (Consolidated)) [2023] KEHC 1403 (KLR) (Commercial and Tax) (27 February 2023) (Ruling)
Neutral citation:
[2023] KEHC 1403 (KLR)
Republic of Kenya
Miscellaneous Civil Application E019 of 2022 & Commercial Case E030 of 2021 (Consolidated)
DO Chepkwony, J
February 27, 2023
Between
CM Construction (EA) Limited
Applicant
and
Junction Apartments Limited
Respondent
As consolidated with
Commercial Case E030 of 2021
Between
Junction Apartments Limited
Applicant
and
CM Construction (EA) Limited
1st Respondent
Steve Oundo
2nd Respondent
Ruling
1.This Ruling relates to the Notice of Motion Application dated 13th January, 2021 filed in HCCOMMMISC E030 OF 2021 “Junction Apartments Application” and the Chamber Summons application dated 23rd February, 2022 in HCOMMARB. E019 OF 2022 “CM Construction Ltd Application” pursuant to the court directions of 5th October, 2022.
2.Junction Apartment’s Application is supported by the Affidavit of Sharon Wanyee sworn on 13th January, 2021. It seeks stay of execution and to set aside the arbitral award published on 14th December, 2020 (“the Arbitral award”) and for the appointment of a different arbitrator to determine thedispute.
3.On the other hand, the CM Construction Ltd application dated 23rd February, 2022 is supported by the Affidavit of Manji Ravji Vekariya sworn on 23rd February, 2022 and seeks Judgment to be entered and decree be issued in terms of the arbitral award. It has annexed a copy of the contract between the parties and the arbitral award.
4.On 5th October, 2022, this court directed the parties to file submissions on the two applications on the following three issues: whether the arbitral award should be set aside, whether the parties be ordered to commence the arbitration before a different arbitrator appointed in consensus of the parties and whether the Judgment should be entered in terms of Arbitral Tribunal’s award.
Brief facts of the Dispute
5.CM Construction(EA) Limited and Junction Apartments entered into building contract agreement on 22nd October, 2012 for construction and completion of Riara Junction Apartments. A dispute arose and a Sole Arbitrator was appointed to determine the same. Eventually, the Arbitrator issued a final award on 14th December, 2020 dismissing Junction Apartment’s claim. It is this award that the parties are seeking to either set it aside or to enforce it. The Final award was in the following terms;
6.I have read through the submissions filed by the parties as well as the authorities relied on. I will address them in my analysis and determination. In that regard the court had previously directed the issues for determination as follows;-a.Whether the arbitral award should be set aside.b.Whether the parties be ordered to commence the arbitration before a different arbitrator appointed in consensus of the parties.c.Whether the Judgment should be entered in terms of Arbitral award.
Analysis and Determination
7.The starting point in any court is to establish whether or not it has jurisdictionsince without it, the court has to down its tools. This was stated in the classic case of The Owners of the Motor Vessel “Lillian S” –vs- Caltex Oil (Kenya) Ltd (1989) KLR 1, where Nyarangi J.A. held as follows:
8.A court derives its jurisdiction either from the Constitution or statute or both as was held by the Supreme Court of Kenya in the case of Samuel Kamau Macharia –vs- KCB & 2 Others, Civil Application No.2 of 2011 stated thus:
9.In arbitration matters, a court expressly derives its jurisdiction through the Arbitration Act. However, the general position under Section 10 of the Act is that courts should not intervene with matters governed by the Arbitration Act except where it is provided to the contrary by the Act. Section 32A of the Act goes on to state:-
10.The Applicant, Junction Apartments Limited, has invoked Section 35 of the Arbitration Act which gives this court jurisdiction to hear the matter as far as setting aside the award is concerned. Section 35 of the Act states,35(1)Recourse to the High Court against an arbitral award may be made only by an application for setting aside the award under subsections (2) and (3).(2)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.
11.Junction Apartment wishes to have the arbitral award set aside on the basis that the arbitral Tribunal did not consider all issues in dispute that the award was in conflict of interest and in breach of public policy. It is further the Applicants case that the arbitrator failed to constrain himself to the issues presented to him by the parties but instead went ahead to consider extroneous factors and issues and indeed render a reasoned award. The Applicant therefore thinks the awards are not legally enforceable and deals with issues not contemplated in the arbitration agreement. It is the Applicant’s case that ; the Arbitrator was affected by fraud was unduly influenced and corrupted in making the Award and eventually prevented the parties from fully presenting their case. However, to the Respondent, CM Construction all these allegations have not been proved and seeks the court to dismiss the application for setting aside with costs.
12.In my view, it is not open for the court to consider whether the Arbitral Tribunal was correct analyzing all the issues raised by the parties since in doing so, the court will be sitting on appeal which it does not have the mandate to. This was the position of Geo Chem Middle East –vs- Kenya Bureau of Standards [2020]eKLR, where the Supreme Court of Kenya quoted with approval Ochieng J’s holding in the High Court that: -
13.However, in addressing whether the arbitral award contravenes public policy, I associate with the finding of the court in the case of Christ for All Nations –vs- Apollo Insurance Co. Ltd [2002] 2 E.A 366 discussed public policy and held: -
14.In this case, I am persuaded that this aspect of public policy does not arise since it has not been shown that the award contravenes the Constitution or any other law, there is also no aspect of national interest in the award given the dispute is between the parties over the construction of private apartments. Therefore, considering the provisions of Section 35(2) above, I find no substantial reason that has been advanced to warrant setting aside the arbitral award. Consequently, the Application dated 13th January, 2021 fails and the same is hereby dismissed with costs.
Whether the court should order appointment of new arbitrator.
15.Junction Apartments is of the view that the Arbitral Tribunal was biased in that he failed to disclose that he schooled with and had worked with or was a close friend to Architect Manduku, an office and or proxy of the Respondent. It thinks that the relationship had a bearing on the award and finally entered on basis of conflicting interest. CM Construction on its part holds that this appointment of new Arbitral Tribunal will depend on whether Junction Apartments succeeds in convincing the court to set aside the Arbitral Award. It holds that if the court does not set it aside, then there will be no need of appointing a new Arbitral Tribunal.
16.In my view, I agree with the Respondent’s submission. The applicant having failed to establish a viable ground for setting aside the award likewise there would be no viable ground to order the arbitrator to proceed afresh before another Arbitrator. The Applicant has merely casted aspersions on the Arbitrator without showing that his relationship with an officer associated with the Respondent actually influenced the final award.
Whether the arbitral award should be enforced.
17.On the other hand, CM Construction (EA) Limited seek adoption of the award as Judgment of the court. The application contains a copy of the Contract between the parties and the arbitral award which is annexed in the Supporting Affidavit. It seeks to have the Arbitral Award enforced as Judgment of the court under Section 36 and 37 of the Arbitration Act and urges the court to grant the application adopting the award as the Judgment.
18.Junction Apartments in opposing the application holds that the Arbitral Award is incapable of being enforced. It submits that the grounds for refusal to enforce an award are similar to those for setting aside an award. In that regard, it reiterates that the Arbitral award contravenes public policy and not binding so as to be enforceable in the circumstances.
19.I have considered contentions by both parties and in my view, CM Constructions has complied with the provisions of Section 36 (3) of the Arbitration Act which states;
20.The Applicant, Junction Apartments failed to establish grounds under which the award should be set aside. The Respondent on the other hand has established a case to adopt the award. It has annexed the requisite annexures in line with Section 36(3) of the Arbitration Act and I find the plead to adopt the award as the court’s Judgment merited.
21.Consequently, in the end do make the following orders:-a.The Notice of Motion Application dated 13th January, 2021 is dismissed with costs.b.The Chamber Summons Application dated 23rd February, 2022 has merit and is allowed as prayed.c.Judgment is hereby entered in terms of the final Arbitral Award dated 14th December, 2020.d.The costs of the application dated 23rd February, 2023 are awarded CM Construction Limited.
It is so ordered.
RULING DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 27TH DAY OF FEBRUARY , 2023.D. O. CHEPKWONYJUDGEIn the presence of:Mr. Ochwo counsel for Applicant in HCCOMMARB NO.E019 of 2022 and Respondent in HCCOMMISC NO.E030 of 2021M/S Diero holding brief for Mr. Lumallas for Applicant in HCCOMMISC NO.E030 of 2021 and Respondent in HCCOMMARB NO.E019 of 2022.Court Assistant - Sakina
