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Court of AppealDismissedCivil Appeal 201 of 1996

JOHN KAGO NDUNGU v JAMES WAMBUGU KARIMI [1998] KECA 35 (KLR)

Court of Appeal of Kenya
16 September 1998
RKR. O. KwachASA. B. ShahEOE. Owour
748 words in judgment
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The bottom line

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Kenya's Court of Appeal ruled that a voluntarily agreed arbitration order and the resulting award stand unless you can prove fraud, mistake, or arbitrator misconduct.

What this practically means

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Executive summary

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This was an appeal to the Court of Appeal at Nairobi against a ruling of Osiemo, J delivered at Machakos on 10 December 1993 (with subsequent decrees of 8 February 1995) in Machakos H.C.C.C. No. 222 of 1992 (O.S). The parties were farmers in a partnership known as Bora Bora Sunset Butchery. The appellant withdrew from the partnership by letter dated 9 September 1992, unilaterally taking Shs. 41,100 from the partnership bank account, and then filed an originating summons for de jure dissolution, taking of accounts and payment of goodwill. By a consent order of 12 March 1993 the disputes were referred to the sole arbitration of Mr Daniel Muia, a certified public accountant, who published his award on 9 September 1993 dissolving the partnership with effect from 22 August 1992, settling the accounts, and directing payments to each party. The appellant applied to set aside the award, alleging that the consent order was tainted because the respondent had opened a different business account in the partnership name, and that the arbitrator had misconducted himself, fraudulently concealed matters, or been wilfully misled by the respondent. The High Court declined to set aside the award. The Court of Appeal unanimously affirmed, holding that the consent order was voluntarily entered into with no mutual mistake, misrepresentation acted upon, or fraud, and that there was nothing to remotely suggest misconduct or deception, the appellant having had full opportunity to present his case. The appeal was dismissed with costs, and the court directed that the award may not be turned into a judgment of the court on application in the superior court.

Questions the Court framed

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The issues the Court set itself to decide, in its own words.

  1. 1.Whether the consent order referring the partnership disputes to arbitration should have been set aside on the ground that the respondent had opened a different business account in the name of the partnership
  2. 2.Whether the arbitrator misconducted himself, concealed matters fraudulently, or was wilfully misled or deceived by the respondent, such that the award should be set aside

Key legal issues

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01

Whether the consent order referring the disputes to arbitration was vitiated

Holding

The Court of Appeal affirmed the High Court's refusal to set aside the consent order, holding it was voluntarily entered into with no mutual mistake, misrepresentation acted upon, or fraud.

Reasoning

The appellant alleged that the respondent had opened a different business account in the name of the partnership before the consent order was recorded. The learned judge considered the consent order and found no mutual mistake, misrepresentation acted upon, or other ground justifying setting aside an agreement. The appellate court agreed, noting the order was voluntarily agreed and that an accountant was a fitting person to take partnership accounts.

p. 2
02

Whether the arbitrator misconducted himself or was misled so as to justify setting aside the award

Holding

The court found no evidence of misconduct, fraudulent concealment, or that the arbitrator was wilfully misled or deceived by the respondent.

Reasoning

The double-barrelled allegations of misconduct and deception failed because the appellant had every opportunity to put his case before the arbitrator, who examined all documents presented by both parties and worked out each party's entitlement upon dissolution. The award dissolved the partnership, settled the accounts for the agreed period, and provided for payments consistent with the parties' capital contributions.

p. 2

Legal principles established

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  • A consent order referring disputes to arbitration will not be set aside absent mutual mistake, misrepresentation acted upon, fraud, or other ground justifying setting aside an agreement.
  • An arbitration award will not be set aside for arbitrator misconduct or deception where the party had full opportunity to present its case and the arbitrator considered the documents and worked out each party's entitlement.

Court orders

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  1. 1.The appeal is dismissed with costs
  2. 2.The award may not be turned into a judgment of the court on application to that effect in the superior court

The bench

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One judgment of the whole court — no separate or dissenting opinions.

RK
majority
AS
majority
EO
majority
On appeal from
High Court of Kenya at Machakos
Machakos H.C.C.C. No. 222 of 1992 (O.S)
Jurisdiction invoked
First appeal against the ruling and subsequent decrees of the High Court (Osiemo, J) in Machakos H.C.C.C. No. 222 of 1992 (O.S); no specific constitutional or statutory provision is cited in the judgment.

Relief refused

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Setting aside of the arbitrator's award

No evidence of misconduct by the arbitrator, fraud, or that he was misled or deceived; the appellant had full opportunity to present his case

p. 2

Setting aside of the consent order referring the disputes to arbitration

The consent order was voluntarily agreed and there was no mutual mistake, misrepresentation acted upon, or other ground justifying setting it aside

p. 2

Costs

The appeal was dismissed with costs to the respondent.

Quotable passages

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Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.

This appeal is totally unmeritorious and is hereby dismissed with costs.
p. 2Disposition - dismissal of appeal
The award may not be turned into judgment of the court, on application to that effect, in the superior court.
p. 2Final orders - restriction on converting the award into a judgment
It was quite voluntarily agreed, as we see it. What better person would there be to take accounts than an accountant?
p. 2Validity of consent order referring disputes to an accountant-arbitrator
The appellant had all the opportunity to put his case before the arbitrator. The arbitrator went into all documents presented to him by both parties and worked out the entitlement of each party, upon dissolution.
p. 2No misconduct where arbitrator considered all documents and both parties were heard

Issues in the judgment

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minor

The judgment does not state the statutory basis for the reference to arbitration or for the application to set aside the award; no legislation is named anywhere in the text.

minor

The judgment records the appeal as against a ruling of 'the superior court (Osiemo, J)' but the header describes it as a Ruling of Mr. J. A. Osiemo with subsequent decrees of 8th February 1995; the decrees are not separately discussed.

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "JOHN KAGO NDUNGU v JAMES WAMBUGU KARIMI [1998] KECA 35 (KLR)", Case Analysis (1998). Civil Appeal 201 of 1996. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1998/35/eng@1998-09-16

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.