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Court of AppealStruck OutCivil Appeal No. 61 of 2012 (reinstated)

Nyutu Agrovet Limited v Airtel Networks Kenya Ltd (Civil Appeal (Application) 61 of 2012) [2024] KECA 523 (KLR)

Court of Appeal
9 May 2024
7,014 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~28 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal struck out Nyutu Agrovet's appeal, confirming that setting aside an arbitral award can only be appealed in rare, extreme cases.

What this practically means

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Executive summary

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This five-judge Court of Appeal bench determined, in limine, whether the reinstated appeal by Nyutu Agrovet met the threshold for admission set by the Supreme Court in its 2019 judgment, which had found a narrow right of appeal from High Court decisions under Section 35 of the Arbitration Act (Maraga, CJ dissenting) and remitted the matter to the Court of Appeal. The dispute arose from a 2007 distributorship agreement between Airtel (then Celtel) and Nyutu Agrovet, a forged bank slips transaction of Kshs.11,000,000, and an arbitral award of over Kshs.526 million that Kimondo, J. set aside in its entirety in December 2011 on grounds that the arbitrator dealt with matters outside the terms of reference, including unpleaded interest and general damages for the tort of negligence. The Court of Appeal held that the appellant failed to bring its case within the circumscribed jurisdiction: the High Court did not step outside the grounds in Section 35(2) and (3). Awarding unpleaded claims falls within the ground that the arbitrator exceeded the ambit of the arbitration; damages for tort were outside the terms of reference and expressly excluded by clause 13.7.1 excluding consequential loss; the judge did not treat the application as a Section 39 appeal; and severability did not arise and was an afterthought. Leave to appeal was denied, the High Court's grant of leave was set aside, the appeal was struck out, and costs were awarded to the respondent, payable by the appellant. The judgment reaffirms party autonomy as the cornerstone of arbitration and the sparingly exercised, narrow appellate review of setting-aside decisions.

Questions the Court framed

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

  1. 1.Whether, in limine, the threshold for admitting the appellant's appeal has been met
  2. 2.Whether the appeal ought to be heard at all
  3. 3.Whether the learned judge, in setting aside the arbitral award, stepped outside the grounds set out in Section 35(2) and (3) of the Arbitration Act

Key legal issues

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01

Threshold test for admitting an appeal from a Section 35 setting-aside decision

Holding

The appellant failed to meet the Supreme Court's threshold test: it did not show that the High Court acted outside Section 35 grounds or that the decision was so grave, manifestly wrong, and door-closing

Reasoning

The Supreme Court in Nyutu delimited a narrow residual jurisdiction permitting appeal only where the High Court stepped outside the Section 35 grounds with grave and manifestly wrong consequences closing the door of justice. Applying that test, the Court found Kimondo, J.'s grounds - unpleaded interest and tort damages outside the terms of reference - were squarely within Section 35(2) and (3), so no exceptional basis for leave existed.

p. 12
02

Whether the judge erred in disallowing unpleaded interest

Holding

The judge acted within Section 35; awarding unpleaded claims is beyond the arbitration's ambit

Reasoning

Section 35(2) and (3) contain no provision permitting an arbitrator to allow unpleaded claims. The arbitrator awarded interest at 16% from 8th May 2009 on all heads when interest had been pleaded only for the Kshs.11,000,000 claim and from later dates for the rest. Granting unpleaded prayers falls within the ground that the arbitrator went beyond the terms of reference, so the judge did not err.

p. 9
03

Whether damages for tort and breach of contract were within the arbitration agreement

Holding

General damages for negligence were outside the terms of reference and expressly excluded by clause 13.7.1

Reasoning

The arbitration clause covered disputes arising out of or relating to the contract or its breach - a contractual dispute. The arbitrator's assessment of general damages for the tort of negligence expanded the contract's margins. Even if foreseeable, the parties expressly excluded liability for consequential loss under clause 13.7.1, so such damages were neither contemplated nor recoverable.

p. 11
04

Severability under Section 35(2)(a)(iv)

Holding

Severability did not arise; the issue was an afterthought not raised before the trial judge

Reasoning

The proviso applies only where the award contains both referred and non-referred matters, permitting severance of the latter. The Court found the decision contained no matter not referred to arbitration, so severability could not arise. Moreover, the argument was not raised before the trial judge nor included in the grounds of appeal, making it an improperly urged afterthought.

p. 12
05

Whether the prior grant of leave by the High Court was conclusive

Holding

The Supreme Court's directions required this Court to determine admission in limine notwithstanding the earlier leave

Reasoning

The appellant argued that the unchallenged leave granted by Kimondo, J. was final under the principle of finality. The Court held that the Supreme Court, aware of that hesitant leave, expressly directed this Court to determine in limine whether the threshold was met, and its decision binds under Article 163(7). The leave question was therefore not settled with finality.

p. 6

Legal principles established

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  • An appeal lies to the Court of Appeal from a Section 35 decision of the High Court only in exceptional, narrowly circumscribed circumstances, exercised sparingly and only in the clearest of cases
  • An intended appellant must demonstrate, in limine, that the case falls within this circumscribed jurisdiction, which the Court considers case by case
  • Courts cannot rewrite contracts between parties; parties are bound by their contractual terms including exclusion clauses
  • The grant of unpleaded prayers falls within the ground that the arbitrator went beyond the ambit of the arbitration under Section 35

Court orders

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  1. 1.Leave to appeal against the decision of the High Court dated 1st December 2011 is denied
  2. 2.What leave was granted by Kimondo, J. is set aside
  3. 3.The appeal is struck out
  4. 4.Costs of the appeal to be borne by the appellant

The bench

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

Mohamed Abdulahi Warsame
M. WarsameJA
Currently serving
majority
majority
majority
majority
On appeal from
High Court of Kenya
Miscellaneous Civil Cause Number 400 of 2011
Jurisdiction invoked
Appellate jurisdiction over a decision under Section 35 of the Arbitration Act, as delimited by the Supreme Court under Article 163(4)(b) and binding under Article 163(7) of the Constitution

Relief refused

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Leave to appeal against the High Court decision setting aside the arbitral award

The appellant failed to demonstrate that the High Court stepped outside Section 35(2) and (3) or that the decision was so grave, manifestly wrong, and completely closed the door of justice

p. 12

Reinstatement of the arbitral award

The appeal was struck out; leave to appeal was denied

p. 12

Costs

Costs of this appeal shall be borne by the appellant

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.

the only instance that an appeal may lie from the High Court to the Court of Appeal on a determination made under Section 35 is where the High Court, in setting aside an arbitral award, has stepped outside the grounds set out in the said Section and thereby made a decision so grave, so manifestly wrong and which has completely closed the door of justice to either of the parties.
p. 7Threshold test for appeals from Section 35 decisions
Leave to appeal against the decision of the High Court dated 1st December 2011 is denied.
p. 12Final orders - leave denied
For avoidance of doubt, what leave was granted by Kimondo, J.is set aside.
p. 12Final orders - leave set aside
The appeal herein be and is hereby struck out.
p. 12Final orders - appeal struck out
A court of law cannot rewrite a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.
p. 10Binding nature of contractual terms and exclusion clauses
Party autonomy is the cornerstone of arbitration.
p. 7Party autonomy principle

Issues in the judgment

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minor

Coram lists five judges but the signature block for G. W. Ngenye-Macharia appears after the Deputy Registrar certification text, an apparent typographical disruption in the judgment text

minor

The notice of motion challenging the record of appeal is referred to both as dated 3rd May 2014 and 3rd May 2012 in different passages

minor

The arbitrator's award is stated as Kshs. 526,720,698 in one passage but Kshs.541,005,922.81 in counsel's submissions

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (4)

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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, "Nyutu Agrovet Limited v Airtel Networks Kenya Ltd (Civil Appeal (Application) 61 of 2012) [2024] KECA 523 (KLR)", Case Analysis (2024). Civil Appeal No. 61 of 2012 (reinstated). Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2024/523/eng@2024-05-09

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