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ELCAllowedNot stated in the judgment as provided· [2024] KEELC 306 (KLR)

NJERI NJAU WAGAKI v ABDIZACK OSMAN MOHAMED ABDI & another

Environment and Land Court
31 January 2024
NMN.A. MATHEKA
1,839 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Mombasa court stopped a property lawsuit because the joint venture contract required the dispute to go to arbitration instead.

What this practically means

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Executive summary

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The 1st defendant applied by Notice of Motion dated 4th October 2023, under Section 6 of the Arbitration Act 1995, Rule 2 of the Arbitration Rules 1997 and Section 3A of the Civil Procedure Act, for a stay of proceedings and referral to arbitration of a dispute arising from a Joint Venture Agreement dated 31st August 2020. Under that agreement the plaintiff, registered owner of Swahili House on Mombasa/Block XVI/493, gave her land to the 1st defendant as developer to construct modern residential premises, with the plaintiff entitled to three two-bedroom apartments and Kshs 1,000,000. Clause 5/6 of the agreement required any dispute to be referred to arbitration. The plaintiff had filed an application dated 23rd June 2023 seeking an injunction and a caution, asserting she remained the lawful beneficial owner and had never transferred the property. The 1st defendant maintained the court lacked jurisdiction pending arbitration, that he was the registered owner following a transfer executed on 5th January 2021, and that construction of a seven-storey building of 14 flats was completed in 2021, with the plaintiff occupying Flats 1, 2 and 4 since September 2021. The court considered Section 6(1) of the Arbitration Act, holding the provision mandatory but subject to exceptions (agreement null and void, inoperative or incapable of performance, or no dispute). Finding the arbitration clause valid and the application filed within the statutory time after appearance, and applying Article 159(2)(c) of the Constitution together with the Blue Limited and Eunice Soko Mlagui authorities, the court allowed the application, stayed all proceedings pending arbitration, referred the dispute to arbitration, and ordered costs to be in the cause.

Key legal issues

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01

Timeliness of the application under Section 6(1) of the Arbitration Act

Holding

The 1st defendant filed the stay application after entering appearance and within the statutory timeframe, so the court was obliged to consider it

Reasoning

Section 6(1) requires the application to be made not later than the time the party enters appearance or files pleadings or takes any other step. The court found that the 1st defendant, after filing a memorandum of appearance, duly filed the stay application within the time frame set out in Section 6(1), and therefore the court proceeded to consider the application on its merits.

p. 3
02

Existence of a valid arbitration agreement

Holding

Clause 6 of the Joint Venture Agreement contains a valid arbitration clause capable of being performed; none of the Section 6(1) exceptions apply

Reasoning

The court examined the dispute resolution clause, which required disputes to be notified in writing and referred to a mutually agreed arbitrator, failing which the Chairman of the Kenya Branch of the Chartered Institute of Arbitrators would appoint one. It found the parties clearly intended to oust court jurisdiction in favour of arbitration, and no allegation that the agreement was null and void, inoperative or incapable of being performed was proved.

p. 3
03

Constitutional promotion of alternative dispute resolution

Holding

Article 159(2)(c) of the Constitution obliges courts to promote arbitration where parties have agreed to it

Reasoning

The court read Article 159(2)(c) together with Section 6(1) of the Arbitration Act and held that where parties consensually choose arbitration, courts must give effect to that choice. It emphasised that courts will promote other forms of dispute resolution where the circumstances allow and the parties have agreed to an alternative mode of resolving their disputes.

p. 3

Legal principles established

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  • Where parties to a contract agree on arbitration as their dispute resolution forum, courts are obliged to give effect to that agreement, and the application to invoke the arbitration agreement must be made not later than the time of entering appearance
  • At the stay stage the court only considers whether there is a valid arbitration clause capable of being performed, not the merits or validity of the underlying agreement

Court orders

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  1. 1.That there be a stay of all proceedings herein pending arbitration
  2. 2.That the dispute between the parties be referred to arbitration
  3. 3.Costs to be in the cause

Authorities

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Legislation

  • Arbitration ActSection 6, Section 6(1), Section 7(1)
  • Arbitration RulesRule 2
  • Civil Procedure Act (Chapter 21, Laws of Kenya)Section 3A
  • Constitution of KenyaArticle 159(2)(c)

Cases cited (2)

  • Blue Limited v Jaribu Credit Traders Limited
    Nairobi (Milimani) HCCS No 157 of 2008
  • Eunice Soko Mlagui v Suresh Parmar & 4 others
    (2017) eKLR
Jurisdiction invoked
Section 6 of the Arbitration Act 1995, Rule 2 of the Arbitration Rules 1997, Section 3A of the Civil Procedure Act (Cap 21)

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, "NJERI NJAU WAGAKI v ABDIZACK OSMAN MOHAMED ABDI & another", Case Analysis (2024). Not stated in the judgment as provided. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2024/306/eng@2024-01-31

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