Kenindia Assurance Co Ltd v Patric Muturi [1994] KECA 78 (KLR)
The bottom line
#The Court of Appeal voided a KSh 4.25 million insurance judgment because the insured sued before completing arbitration, as their policy required.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether Oguk, J's order of 7th July 1992 setting a hearing date amounted to a valid setting aside of the consent order of stay of proceedings made on 18th June 1990
- 2.What powers the High Court has to set aside a stay of proceedings ordered by consent so that a dispute may be referred to arbitration
- 3.Whether completion of the arbitration and making of an award under clause 9 of the policy was a condition precedent to the respondent's right of action
- 4.Whether the hearing and judgment before Kuloba, J were a nullity
Key legal issues
#Effect of the consent order staying proceedings under section 6 of the Arbitration Act
The consent stay remained in force; Oguk, J's order fixing a hearing date did not set it aside, and the subsequent hearing before Kuloba, J was null and void.
The stay was obtained by consent under section 6 of the Arbitration Act before the appellant filed a defence. Clause 9 of the policy made an award a condition precedent to any right of action. The application before Oguk, J was informal and only for a hearing date; setting aside the stay was neither applied for nor pronounced upon. A true consent order can only be set aside by consent or on grounds such as fraud or collusion, none of which were shown.
The condition precedent effect of the 'all differences' arbitration clause
The making of an arbitration award under clause 9 was a condition precedent to any right of action against the insurer; no cause of action accrued to the respondent absent a completed arbitration.
Clause 9 provided that the making of an award shall be a condition precedent to any right of action against the company. The stay had been ordered precisely so the dispute could go to arbitration. Only fraudulent and deliberate frustration of the arbitration by the insurer could displace this, which was not established on the facts; indeed the respondent's advocates bore some blame for the arbitration's breakdown.
Whether Kuloba, J erred in treating the arbitration clause as an improper ouster of the court's jurisdiction
Kuloba, J's reasoning that jurisdiction could not be ousted by an 'unguardedly phrased arbitration clause' was wholly untenable; the parties were bound to arbitrate under the agreed clause.
The court rejected the judge's reliance on unequal bargaining power, noting there is little room for bargaining over motor vehicle insurance policies which are in common form. The parties had agreed to arbitration and had obtained a consent stay under section 6; the proper course where an arbitrator refused to act would have been an application under sections 9 or 12 of the Arbitration Act, not an informal fixing of a hearing date.
Legal principles established
#- A consent judgment or consent order may only be set aside for fraud, collusion or any reason which would enable the court to set aside an agreement, and otherwise only by consent of the parties.
- Where an insurance policy provides that the making of an arbitration award is a condition precedent to any right of action against the insurer, the insured cannot sue the insurer unless the arbitration is first carried out, save where the insurer fraudulently and deliberately frustrates the arbitration.
- A substantive order of stay of proceedings made by consent cannot be set aside by a side wind within an informal application for the fixing of a hearing date when setting aside the stay was not specifically in issue.
Court orders
#- 1.The appeal against the judgment of Kuloba, J is allowed
- 2.The decretal sum deposited by the appellant pursuant to the ruling of the court dated 16th July 1993 in Kenindia Assurance Company Limited v Patric Muturi Civil Application No NAI 107 of 1993 (44/93 UR), together with the interest earned, shall forthwith be released to the appellant
- 3.The appellant shall have its costs of the appeal
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Wrote the judgment
Wrote the judgment
- On appeal from
- High Court
- Jurisdiction invoked
- First appellate jurisdiction over the High Court (the judgment does not cite a specific constitutional or statutory provision)
Relief refused
#The respondent's implied application to set aside the consent order of stay of proceedings
A consent order can only be set aside by consent or on proof of fraud, collusion or other grounds for setting aside an agreement; the informal application was only for fixing a hearing date and no such grounds were established
Costs
The appellant shall have its costs of the appeal; costs were also awarded in the judgment below but that judgment was reversed as a nullity
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
It can only be set aside by consent, unless upon proper application having been made, it can be shown, as is not the case here, that the consent order was obtained by fraud or collusion.
The substantive order of stay of proceedings cannot be set aside by a side wind within the context of an informal application for the fixing of a hearing date, when the setting aside of the stay of proceedings was not specifically in issue or cogent reasons advanced in support of it.
and the making of an award shall be a condition precedent to any right of action against the company
The appeal against his judgment is allowed and the decretal sum deposited by the appellant as a result of the ruling of this court dated 16th July, 1993, in the case of Kenindia Assurance Company Limited v Patric Muturi Civil Application No NAI 107 of 1993 (44/93 UR), together with the interest earned, shall forthwith be released to the appellant who shall also have its costs of this appeal.
Issues in the judgment
#The judgment states the informal application before Oguk, J was on 7th July, 1990, but earlier and later passages place that hearing on 7th July, 1992; the date 1990 appears to be a typographical error in the judgment.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Kenindia Assurance Co Ltd v Patric Muturi [1994] KECA 78 (KLR)", Case Analysis (1994). . Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1994/78/eng@1994-05-31
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.