1.The facts leading to this case are that the parties entered into an agreement dated June 15, 2016 for building works on property known as LR No 2/406 in Nairobi. A dispute ensued when the applicant terminated the contract and the respondent claimed an amount of Kshs 54,807,338.22 on account of alleged loss of anticipated profit. The dispute was referred to arbitration.
2.The Chairperson of the Architectural Association of Kenya appointed Steve Oundo as the sole arbitrator. The arbitrator on December 15, 2021 awarded the respondent a sum of Kshs 16,442,201.50 together with interests and and 2/3 of the costs and dismissed the counterclaim by the applicant.
3.This is what prompted the two (2) applications before this court. The application dated August 4, 2022 seeks to set aside the arbitral award and the application dated August 30, 2022 seeks recognition and adoption of the arbitral award.
Application dated August 4, 2022
5.The applicant seeks the following orders;
6.The application is premised on the grounds on the face of it and the supporting affidavit sworn by Muthini Ngola dated August 4, 2022 and buttressed by the written submissions dated January 19, 2023.
7.It was the applicant’s case that following a competitive process, the respondent was prequalified for the building contract on LR No 2/406 in Nairobi. The Project Finance Agreement and the agreement for conditions of contract building were signed.
8.Following the award, the applicant alleged that the respondent had misrepresented to the applicant that they were the most pre-qualified contractor for the contract. The applicant alleged that the respondent lacked the financial muscle to undertake the development project as per the financial statements submitted during the tender process.
9.The applicant further stated that the evidence adduced by the respondent in support of its financial capability did not amount to a letter of credit and that there was no proof of an office or evidence of office service facilities. In view of the above reasons the applicant terminated the contract resulting to the present dispute which was referred to arbitration.
10.The applicant avers that the arbitrator rendered a decision that was manifestly wrong in law and against public policy for various reasons. The applicant states that the arbitrator erred in finding that the Joint Building Council and the Project Financing Agreement did not form part of the contract; that the arbitrator disregarded the applicant’s evidence particularly the Quantity Surveyor’s expert evidence; that the arbitrator gave no reason for awarding the respondent 30% of the amount claimed, 2/3 of the costs and the tribunal’s costs and 12% interest per annum; that the arbitrator’s award is full of contradictions and inconsistencies and finally that the award was dated December 15, 2021, signed on December 21, 2021 yet the same was published and released to the parties on July 7, 2022.
11.The applicant also faulted the arbitrator for failing to give the parties an opportunity to come up with the rules of procedure on admissibility of evidence. It was the applicant’s submissions that its right to a fair hearing was violated by the arbitrator and had the arbitrator listened to the expert evidence his decision was bound to be different.
12.The respondent opposed the application through a replying affidavit dated November 3, 2022 sworn by Carolyne Muthue and further bolstered by the written submissions dated January 22, 2021. The respondent took issue with the form of the application and argued that the same was defective and incompetent. It was also averred that the application is brought under the wrong provisions of the law.
13.The respondent also observed that the application for setting aside an award should be brought not more than three months from the date of receiving the award. The respondent confirmed that the award was ready for collection on December 15, 2021 when the notice was sent to the parties by the arbitral tribunal. It was contended that the award was said to be received by the parties when the notice to the parties was sent informing them that it was ready for collection.
14.The arbitrator wrote to the parties again on June 28, 2022 indicating that the respondent had cleared the arbitrator’s fees but that the applicant had not yet done so. Eventually, through a letter dated 6th July 2022, the arbitrator confirmed the payment of the arbitrator’s fees by the applicant. Counsel therefore submitted that the court lacked jurisdiction to entertain the application for it was brought outside the three months provided for by law.
15.The respondent further submitted that the applicant had not met the conditions for setting aside the arbitral award and that it had instead invited the court to sit in its appellate capacity. Counsel submitted that the court could not sit on an appellate capacity to review the merits of the award as its role was only supervisory. It was the respondent’s argument that the issues raised by the applicant in the application had been conclusively addressed by the arbitral tribunal.
16.The respondent also submitted that the applicant had not proved any grounds laid out in section 35(2) of the Arbitration Act for setting aside the award. It was submitted that the parties were all given a fair hearing and given an opportunity to file documents, examine witnesses and file submissions. With respect to the rules of procedure at the arbitral tribunal, counsel submitted that at the preliminary hearing the parties set out the rules of procedure as well as the roadmap for the conduct of the arbitration.
17.Before getting into the substance of the issues raised, I must first determine whether the application is defective and what the purport of that is. It has been submitted that the application should have been brought by way of a Notice of Motion as opposed to an Originating Summons. It was also averred that the application is brought under the wrong section of the law, referring to section 39 of the Act.
19.The purport of this is that failure to follow procedure does not go into the jurisdiction of the court. In the case of Microsoft Corporation vs. Mitsumi Computer Garage Ltd & Another Nairobi (Milimani) HCCC No. 810 of 2001  KLR 470;  2 EA 460 Ringera, J (as he then was) expressed the same viewpoint as follows:Following this, I do not find the application to fatally defective.
20.Having said this, I turn to the question as to whether the court has jurisdiction to hear and determine the application for setting aside the award. The Arbitration Act under section 35(3) gives the timeline within which an application for setting aside an award can be filed. It provides that;
23.I concur with these decisions that time starts running after the arbitrator has given notice to the parties to inform them that the award is ready for collection. In the present case, the Arbitrator by a letter dated December 15, 2021 informed both parties that the award was ready for collection and stated that it would be issued upon full payment of the arbitrator’s fee.
24.In view of this, the application for setting aside the arbitral award ought to have been made within three months from December 15, 2021. The present application was filed on 4th August 2022, about eight (8) months later and certainly outside the three (3) months prescribed by law.
27.No leave was sought by the applicant to file the present application out of time. Even then, and without any reason having been given for the delay, I must note that this court does not have the jurisdiction to extend time for the application for setting aside the award. In the premises the application was filed contrary to section 35(3) of the Arbitration Act. This court is therefore bereft of the jurisdiction to address the substantive issues raised in the application.
28.The result of this is as has always been stated in the often-cited case of Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd that if this court lacks jurisdiction, then it must lay down its tools. On this basis I shall say no more on this application save to state that the applicant has failed to establish the basis for setting aside the award.
Application dated August 30, 2022
29.The respondent subsequently filed the application dated August 30, 2022 under section 36 of the Arbitration Act, Rule 9 of the Arbitration Rules 1997 and all other enabling provisions of the law.
30.The application seeks the following orders;
31.It is supported by the affidavit sworn by Carolyne Muthue dated August 30, 2022 and written submissions dated January 19, 2023. In response thereto, the applicant filed a replying affidavit sworn by Morris Njagi dated November 24, 2022 and written submissions dated January 22, 2023. The parties have respectively reiterated their positions in the converse application.
Determination and Final Orders
35.For the reasons I have stated, I find that the application dated August 4, 2022 is without merit and is dismissed with costs. I find merit in the application dated August 30, 2022 and allow it on the following terms.i.That the final award published on December 15, 2021 by Stephen Oundo is hereby recognized and adopted as a decree of this courtii.Leave is hereby granted to the respondent to enforce and execute the award.iii.The respondent shall have the costs of this application