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Court of AppealPartially AllowedCivil Application No. NAI 327 of 2009 (UR 225/2009)

Safaricom Limited v Ocean View Beach Hotel Limited & 2 others [2010] KECA 346 (KLR)

Court of Appeal of Kenya
16 April 2010
ROR.S.C. OmoloPWP.N. WakiJNJ.G. Nyamu
11,358 words in judgment
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The bottom line

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Kenya's Court of Appeal gave Safaricom a 28-day injunction protecting its Mombasa equipment, insisting courts support arbitration rather than decide the dispute themselves.

What this practically means

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Executive summary

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This is a ruling of the Court of Appeal at Nairobi (Omolo, Waki and Nyamu, JJ.A) on a notice on motion by Safaricom Limited under Rule 5(2)(b) of the Court of Appeal Rules seeking an injunction pending an intended appeal against the ruling of Koome, J of 6th November 2009 in H.C.C.C. No. 394 of 2009, by which the High Court refused Safaricom's application under section 7 of the Arbitration Act for an interim measure of protection of its telecommunications equipment on land in Mombasa. Safaricom's agreement to lease with Ocean View Beach Hotel contained an arbitration clause; the hotel declined to execute the lease because of the charge in favour of Salim Sultan Moloo, and Alsai (K) Ltd asserted a competing registered lease, leading to demands that Safaricom vacate and remove its equipment. Omolo, JA held that the Court's jurisdiction under Rule 5(2)(b) rests on a lodged notice of appeal and the established arguability and nugatory-ness guidelines; he found the intended appeal arguable and held that eviction and demolition would render it nugatory, granting prayer 2 limited to restraining eviction and demolition. Nyamu, JA went further: analysing sections 7, 10, 17 and 39 of the Arbitration Act, he held no appeal lay (no party agreement to appeal and no leave), that the High Court had exceeded section 7 by applying Giella principles and usurping the tribunal's competence-competence, and that the ruling was a nullity which he struck out under the Court's inherent jurisdiction and sections 3A and 3B of the Appellate Jurisdiction Act, granting an interim measure for 28 days. Waki, JA agreed an interim measure should issue for 28 days and the appeal was arguable, but declined, absent full argument, to declare the High Court ruling a nullity. All three judges confined the injunction to 28 days to enable arbitration to commence and ordered costs of the motion to be in the intended arbitration. The decision of the High Court was disturbed to the extent that the preservative relief the High Court refused was granted on appeal.

Questions the Court framed

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

  1. 1.Whether the Court has jurisdiction under Rule 5(2)(b) to grant an injunction pending an intended appeal where only a notice of appeal has been lodged
  2. 2.Whether the intended appeal is arguable and not frivolous
  3. 3.Whether the intended appeal would be rendered nugatory if the preservative order is not granted
  4. 4.Whether the Court has jurisdiction over the intended appeal given the Arbitration Act regime (sections 7, 10, 17 and 39)
  5. 5.Whether the High Court ruling of 6th November 2009 was a nullity for exceeding its jurisdiction under section 7 of the Arbitration Act, and whether the Court can strike it out at this stage under sections 3A and 3B of the Appellate Jurisdiction Act

Key legal issues

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01

Scope of the Court of Appeal's jurisdiction

Holding

The Court of Appeal's jurisdiction and powers can only be exercised in relation to appeals from the High Court; without an appeal or a notice of appeal, it has no business meddling in a High Court decision.

Reasoning

Omolo, JA traced the position to section 64(1) of the former Constitution and section 3 of the Appellate Jurisdiction Act, both of which tie the Court's powers to appeals. The Court's earlier decision in the Rai case had extensively dealt with the difference between the original, unlimited jurisdiction of the High Court and the appellate jurisdiction of the Court of Appeal, which cannot conduct a first-instance trial.

p. 2
02

Principles governing Rule 5(2)(b) applications

Holding

Filing of a notice of appeal gives the Court jurisdiction to hear a Rule 5(2)(b) motion, but the order is discretionary and governed by the arguability and nugatory-ness guidelines; the exercise is original, not an appeal against the trial judge's discretion.

Reasoning

The Court adopted the classic formulation in Ruben v Nderito. It stressed that a Rule 5(2)(b) motion is not the hearing of the appeal itself, so no conclusive findings are made, and an applicant who fails to show an arguable appeal is not barred from lodging the appeal. Where no actual appeal is filed, an intention to appeal manifested by a notice of appeal suffices.

p. 3
03

Arguability and nugatory-ness on the facts

Holding

The intended appeal was arguable, and if eviction and demolition proceeded the intended appeal would be rendered nugatory; hence a preservative order was warranted.

Reasoning

The respondents had demanded that the applicant vacate and remove or demolish its equipment; on the available material the applicant faced eviction and removal of its equipment, which would render the intended appeal nugatory. Omolo and Waki, JJ.A held the jurisdictional point (whether any appeal lies given the Arbitration Act) was itself arguable, having not been fully argued before the Court.

p. 5
04

Jurisdiction over appeals in arbitration matters under the Arbitration Act

Holding

Under section 39 of the Arbitration Act, an appeal to the Court of Appeal in a domestic arbitration requires a prior agreement of the parties to appeal and leave of the High Court or special leave of the Court of Appeal; none existed, so in Nyamu, JA's view no appeal lay and the notice of appeal conferred no jurisdiction.

Reasoning

Nyamu, JA analysed sections 10, 17 and 39 of the Arbitration Act and concluded that court intervention is restricted to a facilitative role; the High Court's only mandate was to grant or refuse an interim measure under section 7 without delving into the merits. Because there was no proof of a prior agreement to appeal and no leave was granted or sought within 14 days, neither the High Court ruling (beyond section 7) nor the notice of appeal was competent. He held the ruling was a nullity and, invoking sections 3A and 3B of the Appellate Jurisdiction Act and the Court's inherent jurisdiction over nullities, struck it out. The majority declined to make such a final pronouncement on a Rule 5(2)(b) motion without full argument.

p. 17
05

Interim measures of protection under section 7 of the Arbitration Act

Holding

Interim measures of protection are 'holding' orders made in support of the arbitral process; a court entertaining a section 7 application should not apply the civil-procedure (Giella) tests for interlocutory injunctions or rule on the merits, since there is no suit pending before commencement of the arbitration.

Reasoning

Nyamu, JA explained that the Arbitration Act is modelled on the UNCITRAL Model Law, that the arbitral tribunal (once constituted) may issue interim measures under Article 17, and that section 7 permits court intervention before or during arbitral proceedings. He listed the essentials: existence of an arbitration agreement, threat to the subject matter, the appropriate measure on the facts, and the period of the measure to avoid encroaching on the tribunal's decision-making power. He endorsed Channel Tunnel v Balfour Beatty on respecting the parties' choice of tribunal, and held the High Court violated section 17's competence/competence principle.

p. 13

Legal principles established

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  • The jurisdiction and powers of the Court of Appeal can only be exercised where there is an appeal, or a manifested intention to appeal by lodgment of a notice of appeal, from the High Court.
  • The twin guidelines for relief under Rule 5(2)(b) are that the appeal or intended appeal must be arguable (not frivolous) and that, if successful, it would be rendered nugatory unless the preservative order is granted.
  • An arguable appeal does not mean an appeal that will or must succeed, and findings on a Rule 5(2)(b) motion are not conclusive of the appeal.
  • An appeal to the Court of Appeal in a domestic arbitration under section 39 of the Arbitration Act requires a prior agreement of the parties that an appeal shall lie and leave of the High Court (or special leave of the Court of Appeal).
  • A court asked under section 7 of the Arbitration Act for an interim measure of protection must not adjudicate the merits of the dispute or prejudice the outcome of the arbitration, which is the province of the arbitral tribunal under the competence/competence principle.

Court orders

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  1. 1.Notice on motion dated 16th November 2009 allowed; prayer 2 granted
  2. 2.Injunction granted restraining the respondents from evicting the applicant from the premises and from demolishing its equipment on the premises, limited to 28 days from the date of the order to enable the process of arbitration to commence
  3. 3.The injunction does not bar the parties from proceeding with arbitration should they wish to do so
  4. 4.Costs of the motion to be in the intended arbitration
  5. 5.(Nyamu, JA) The ruling of Koome, J dated 6th November 2009 struck out and an interim measure of protection granted for 28 days only, failing which the order shall automatically cease to operate

The bench

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Judges wrote separately. A dissent does not bind; a concurrence may narrow the ratio.

RO
majority

Wrote the judgment

Delivered the leading ruling. Held that under Rule 5(2)(b) the Court exercises a preservative jurisdiction dependent on a notice of appeal; found the intended appeal arguable and that refusal of the injunction would render it nugatory; declined to declare the High Court ruling a nullity at this interlocutory stage and granted prayer 2 limited to restraining eviction and demolition, for 28 days.

Accordingly I would allow the notice on motion dated and lodged in Court on 16th November, 2009 and grant prayer No. 2 in the said motion.p. 5
PW
concurring

Wrote the judgment

Agreed with both brothers that an interim measure of protection should issue in terms of prayer 2, limited to restraining eviction and demolition, for 28 days. Agreed the intended appeal was arguable but declined, absent full argument, to make a final pronouncement that the superior court's decision was a nullity or that no appeal lay.

I do not agree that the case before us is appropriate for a final pronouncement on the issue of jurisdiction and therefore the summary nullification of the proceedings and decision of the superior court.p. 7
JN
concurring

Wrote the judgment

Dissented in part. Held that the dispute was governed by the Arbitration Act, that no appeal lay under section 39 as prerequisites (party agreement and leave) were absent, that Koome, J's ruling usurped the arbitral tribunal's competence-competence and was a nullity, and that invoking sections 3A and 3B of the Appellate Jurisdiction Act and the Court's inherent jurisdiction over nullities, he would strike out the High Court ruling and grant an interim measure of protection for 28 days to allow arbitration to be instituted.

I hereby strike out the ruling dated 6th November, 2009 by Koome, J and grant an interim measure of protection in terms of prayer 2 of the application dated 15th November, 2009.p. 18
On appeal from
High Court of Kenya at Nairobi (Commercial & Tax Division)
H.C.C.C. No. 394 of 2009
Jurisdiction invoked
Rule 5(2)(b) of the Court of Appeal Rules; section 3(1) of the Appellate Jurisdiction Act (Cap 9) and section 64(1) of the former Constitution

Relief refused

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Any injunction extending beyond restraint of eviction and demolition of equipment

The grant of the injunction was expressly limited to preservation of the applicant's possession pending arbitration

p. 5

An order barring the parties from proceeding with arbitration

The dispute is to be resolved through the arbitral procedure chosen by the applicant and the 1st respondent

p. 5

Nyamu, JA's proposed summary nullification of the High Court ruling as a majority outcome

The other two judges held that a Rule 5(2)(b) motion is not the occasion for a final pronouncement on jurisdiction without full argument

p. 7

Costs

The costs of the motion shall be in the intended arbitration.

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.

Accordingly the final orders of the Court shall be that an injunction is granted to the applicant to last for 28 days from the date of the order to enable the process of arbitration to commence. The costs of the motion shall be in the intended arbitration.
p. 5Final orders - injunction granted for 28 days; costs in the intended arbitration
The interim measure of protection in respect of the telecommunications equipment is granted for a period of 28 days only to enable the parties to institute the necessary arbitral proceedings failing which the order shall automatically cease to operate. Costs in the intended arbitration.
p. 18Nyamu, JA - separate orders striking out the High Court ruling and granting a time-limited interim measure
If there is no appeal or no intention to appeal, this Court would have no jurisdiction to meddle in a decision made by the superior court.
p. 2Appellate jurisdiction exists only in relation to appeals from the High Court
It has been repeatedly said that an arguable appeal does not connote an appeal that will or must succeed.
p. 4Meaning of 'arguable appeal' under Rule 5(2)(b)
1. In dealing with applications under rule 5 (2) (b) of the Court of Appeal Rules the Court of Appeal exercises original jurisdiction. 2. Once the applicant is properly before the Court, the Court has jurisdiction to grant an injunction or make an order for stay on such terms as the Court may think just. 3. This exercise does not constitute an appeal from the trial judge’s discretion to the Court of Appeal.
p. 3Nature of Rule 5(2)(b) applications (Ruben v Nderito, adopted)
A court of law when asked to issue interim measures of protection must always be reluctant to make a decision that would risk prejudicing the outcome of the arbitration.
p. 14Judicial restraint in supporting arbitration
Except as provided in this Act no court shall intervene in matters governed by this Act.
p. 10Section 10 of the Arbitration Act - minimal judicial intervention

Issues in the judgment

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minor

The judgment renders the leading injunction case inconsistently, first as 'Giulla vs Cassman Brown' and later as 'GUILLA principles', where the reported name is Giella v Cassman Brown.

minor

The property is identified as L.R. No. 4709 Section 1 Mainland North in parts of the judgment but as 'L.R. No.4707 section 1 Mainland North' in Nyamu, JA's narrative of the section 7 application.

minor

Nyamu, JA refers to the High Court (Commercial Court) as the 'supreme court' in two passages, an apparent misnomer.

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (12)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Safaricom Limited v Ocean View Beach Hotel Limited & 2 others [2010] KECA 346 (KLR)", Case Analysis (2010). Civil Application No. NAI 327 of 2009 (UR 225/2009). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2010/346/eng@2010-04-16

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