Samura Engineering Limited v Don Woods Limited [2019] KECA 43 (KLR)
The bottom line
#Kenya's Court of Appeal confirmed an arbitration award can be thrown out entirely if the arbitrator was appointed under the wrong contract clause and enforcement rules are not followed.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the trial court misapprehended the correct facts of the case before it.
- 2.Whether the trial court not only misapprehended but also misapplied the law to the facts and therefore arrived at a wrong conclusion on the matter.
- 3.Whether the trial court erroneously exercised its discretion and granted a relief not applied for by the respondent.
Key legal issues
#Whether the appointment of the arbitrator complied with clause 35 of the sub-contract and whether its breach vitiated the arbitral proceedings
Clause 35 designated the Chairman for the time being of the Architectural Association of Kenya as the appointing authority; the appellant instead procured appointment by the Chartered Institute of Arbitrators by citing a non-existent clause, and its failure to controvert the allegation of misleading the Institute meant the appointment stood vitiated.
The Court perused clause 31 (which dealt with a surety bond) and found clauses 31.2 and 32.2 non-existent. The appellant did not controvert the assertion that citing a non-existent clause misled the Institute, nor exhibit the content of the clause as forwarded. Appointment of arbitrators must follow the parties' agreement; non-compliance with clause 35 was a potent ground to set aside the award, and could not be atoned for by participation in the proceedings or payment of the arbitrator's fees.
Whether the respondent waived its right to object to the arbitrator's jurisdiction under section 5 of the Arbitration Act
Section 5 is not a stand-alone provision and must be read with section 13(3); since no time limit was prescribed in the clause, the terms of reference, or the Act for raising the objection, and 'without undue delay' is undefined, the respondent was entitled to object, especially given flagrant flouting of clause 35.
The Court construed section 5 alongside section 13(3) which governs challenges to an arbitrator's mandate. Neither clause 35 nor the arbitrator's pre-prepared terms fixed a time limit for objecting on want of jurisdiction, and no case law defined 'without undue delay'. Koome, J had observed the complaint came six months after onset of the arbitration, but in the absence of any definition the trial court could not be faulted for holding the respondent entitled to complain where there was evidence of flagrant flouting of clause 35 by the appellant.
Whether the issue of the arbitrator's want of jurisdiction was res judicata following Koome, J's ruling and the dismissal of OS 591 of 2009
Koome, J's order merely declined, in the exercise of discretion, to stay the arbitral proceedings and made no definitive finding on jurisdiction; the OS was dismissed for want of prosecution, not on merit, so the issue was not res judicata and the trial court properly revisited it.
The Court adopted the res judicata principles in Njue Ngai v Ephantus Njuru Ngai and section 7 of the Civil Procedure Act, which requires that the matter have been directly and substantially in issue and heard and finally decided. Koome, J's ruling was limited to a discretionary refusal of stay, none of whose reasons touched the merit of the jurisdiction question; the OS, which was the proper forum for that question, was dismissed for want of prosecution and the application to revive it was also dismissed. The issue therefore remained amenable to subsequent revisit.
Whether the appellant complied with the mandatory requirements for enforcement of the award under section 36(3) of the Arbitration Act and Rules 4 and 5 of the Arbitration Rules
The appellant never served its enforcement application on the respondent and annexed only copies, not originals or certified copies, of the award and arbitration agreement; the trial court could not be faulted for vitiation of the enforcement application for non-compliance with mandatory procedures.
Rule 4(3) required service of the enforcement application on all participating parties within seven days of filing, and Rule 5 required notice to the respondent of the registry in which the application was filed and the date the award was filed. The record was explicit that the appellant never complied. The appellant also did not dispute that it annexed only a copy of the award and schedule of costs, neither originals nor certified copies of the award and the agreement containing the arbitral clause, contrary to section 36(3).
Whether the trial court exceeded its jurisdiction by setting aside the award and nullifying the arbitral process when the respondent's application had not invoked section 37 procedures or sought nullification
The trial court, seized of the matter as a court of law and justice, was entitled to invoke its inherent power under section 3A of the Civil Procedure Act, the overriding objective in sections 1A and 1B, and Article 159(2)(d) of the Constitution to remedy flagrant flouting of the law and procedure; it did not exceed its jurisdiction.
The Court held the trial court was not expected to perch itself on the judicial fence and grant no remedy for flaws it had itself identified on sound factual and legal basis. It cited the inherent jurisdiction doctrine from Equity Bank v West Link Mbo and Kenya Power v Benzene Holdings, the overriding objective from City Chemist v Orient Commercial Bank, and Article 159(2)(d) as explained in Raila Odinga v IEBC, Lemaken Arata and Patricia Cherotich Sawe. Applying these principles, the trial court did not exceed its jurisdiction in setting aside the award.
Whether H.C. Misc. Application No. 714 of 2012 became spent upon issuance of the enforcement order, precluding the respondent's application
No rule of law or case law supported the proposition; the file remained alive because execution was still ongoing, so the respondent was entitled to seek relief on the same file to forestall completion of execution.
The appellant argued that the enforcement application became spent once the enforcement order was granted and could not be reopened. The Court found no authority cited for that proposition and noted that the execution process, including instructions to auctioneers to sell the respondent's property, was still ongoing. The file therefore remained live and the respondent was entitled to seek relief within it.
Legal principles established
#- An arbitrator must be appointed in accordance with the arbitration agreement of the parties, and a party who cites a wrong or non-existent clause to procure appointment cannot rely on participation in the proceedings to validate the process; failure to comply with the contractual prerequisites vitiates the resulting award.
- Participation in arbitral proceedings does not preclude a party from later raising a plea that the tribunal lacked jurisdiction where the objection was raised without undue delay and the issue was never finally determined by a competent court.
- A party seeking to enforce an arbitral award must furnish the original arbitral award and the original arbitral agreement or duly certified copies of them, and non-compliance with section 36(3) of the Arbitration Act and Rules 4 and 5 of the Arbitration Rules vitiates the enforcement application.
- A High Court seized of an application arising from a flagrantly flawed arbitral process may, in the absence of a specific request, invoke its inherent power under section 3A of the Civil Procedure Act, the overriding objective, and Article 159(2)(d) of the Constitution to grant a remedy for the flouting of the law and procedure.
- An application for stay of arbitral proceedings that is decided on discretionary grounds does not amount to a definitive finding on the tribunal's jurisdiction, so the jurisdictional issue is not res judicata and remains open to revisit by the court.
Court orders
#- 1.The appeal is dismissed with costs to the respondent.
- 2.The ruling of the High Court (F. Gikonyo, J) dated 30th September 2014, which set aside the arbitral award and refused recognition and enforcement of the award, is affirmed.
The bench
#One judgment of the whole court — no separate or dissenting opinions.
- On appeal from
- High Court of Kenya at Nairobi
- H.C. Misc. Application No. 714 of 2012
- Jurisdiction invoked
- First appeal from the High Court in a matter arising under the Arbitration Act (recourse and enforcement provisions, sections 35, 36 and 37 of the Arbitration Act)
Relief refused
#The appellant's prayer that the appeal be allowed, the impugned orders set aside and substituted with an order dismissing the respondent's application dated 8th March 2013, with costs to the appellant
The Court found no merit in any of the eight grounds of appeal; the trial court neither misapprehended the facts nor misapplied the law, and was entitled to invoke its inherent power, the overriding objective and Article 159(2)(d) to vitiate the flawed arbitral process.
Costs
The appeal was dismissed with costs to the respondent.
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.
The law is very clear that appointment of arbitrators is in accordance with the agreement of the parties or, failing any agreement by the parties, in accordance with the Arbitration Act which is the law of Kenya
The upshot of the above assessment and reasoning is that we find no merit in the appeal. It is accordingly dismissed with costs to the respondent.
Accordingly, such an award under section 37(1) (a) (vi) of the Arbitration Act has not yet become binding on the parties and the arbitral award published on the 22 nd day of March, 2012 is hereby set aside. As a consequence, the recognition or enforcement of the said award is hereby refused by the Court.
It is our finding that in the absence of any request to do so from the respondent, the trial court was entitled to invoke its policing authority to remedy any flagrant flouting of both the law and procedures governing the litigation before it and also for ends of justice to be met to both parties litigating before it and for purposes of preserving the dignity of the court.
The issue was therefore not res judicata. The trial court properly revisited it, interrogated it and made findings therein.
it is not the business of Courts to rewrite contracts between parties. Second, Parties are bound by the terms of their contracts, unless coercion, Fraud or undue influence are pleaded and proved.
Issues in the judgment
#The sub-contract's arbitration clause is inconsistently identified within the judgment itself: the opening paragraphs describe the arbitration clause as Clause 35, but the narrative then states the appellant invoked 'clause 31 of the sub-contract' and 'Clause 32.2 of the subcontract', while the trial court's ruling quoted in the judgment treats clauses 31 and 31.2 as non-existent and clause 35 as the sole arbitration clause.
The grounds of appeal refer to the respondent's application as 'the application dated 8 th March, 2014' in ground 5, whereas the judgment elsewhere consistently dates that application 8th March 2013.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Samura Engineering Limited v Don Woods Limited [2019] KECA 43 (KLR)", Case Analysis (2019). Civil Appeal No. 14 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2019/43/eng@2019-12-20
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.