Total Kenya PLC v Ngure

2. In the memorandum of appeal, the appellant essentially faults the learned Judge for failing to nd that a dispute capable of being referred to arbitration had crystalised between the parties and nding that the parties had not dened the questions to be referred to arbitration. 3. In summary, the appellant’s application before the ELRC was premised on the grounds that the respondent’s entire claim was predicated on a Letter of Appointment dated 15th June 2017 as read together with the Young Dealer Marketing Licence Agreement (Likoni Road Total Service Station) (“the Agreement") dated 23rd February 2018 entered into between the parties herein. It was the appellant’s case that as per clause VIII (iv) of the Agreement, the parties voluntarily ousted the jurisdiction of the courts by requiring all disputes arising from the Agreement to be referred to arbitration. The appellant, therefore, faulted the respondent for preferring the courts as opposed to arbitration in settling his claim against the appellant, arguing that the arbitration clause in the Agreement was capable of being performed. The appellant urged the ELRC to promote alternative forms of dispute resolution, including arbitration, by staying the main suit and referring the matter for arbitration. 4. The respondent swore an adavit on 4th May 2021 in opposition to the application, averring that the application was defective as it failed to highlight the nature of the dispute to be referred to arbitration; that since the parties had not attempted to settle the matter amicably, the precondition set prior to referral to arbitration had not been met; that the arbitration clause was available only during the existence of the Agreement and not after it was terminated; and, that the reliefs sought in his claim were beyond the scope of arbitration and the jurisdiction of an arbitrator, as he was seeking a declaration of the existence of an employment contract. 5. When the appeal came up for hearing, learned counsel Ms. Githu appeared for the appellant, while learned counsel Mr. Maina represented the respondent. They briey highlighted the written submissions which they had already led. 6. Relying on the submissions dated 7th May 2024, Ms. Githu argued that the learned Judge erred in declining to stay the proceedings and refer the dispute to arbitration as provided by section 6 of the Arbitration Act. Counsel submitted that the trial court erred on two principles. Firstly, by incorrectly requiring the appellant to explicitly set out the nature of the dispute to be arbitrated when the dispute was already detailed in the respondent's own Statement of Claim. According to counsel, this hurdle placed on the appellant’s path contravened the Act. In support of her argument, counsel cited Zaidi vs. Lake Turkana Wind Power Limited [2023] KEELRC 3414 to argue that a party needs not reframe a dispute that is already outlined in a Statement of Claim. 7. Secondly, counsel submitted that the learned Judge erred by failing to properly exercise her discretion under section 6 of the Arbitration Act to determine whether the respondent's claim fell within the broad scope of the arbitration clause in the Agreement. Relying on Halki Shipping Corporation vs. Sopex Oils Ltd (as cited in UAP Provincial Insurance Co Ltd vs. Michael John Beckett [2013] eKLR), counsel emphasized that a stay should be granted unless there is "no dispute in fact." Pointing to Esmailji vs. Mistry Shamji Lalji & Co. [1984] KLR 150, counsel submitted that the principles for granting a stay under section 6, includes a demonstration of willingness by the applicant to arbitrate and that the dispute falls within a valid arbitration clause. Adverting to Mbogo vs. Shah [1968] EA 93 on the principles guiding the interference of an appellate court in the discretion of a trial court, counsel argued that our interference with the exercise of discretion by the trial court was ripe. Consequently, Ms. Githu pleaded with us to allow the appeal as well as the notice of motion. 8. On his part, learned counsel Mr. Maina -opposed the appeal through submissions dated 5th April 2024. Counsel argued that the appeal should be dismissed on several grounds. Firstly, Mr. Maina submitted https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1763/eng@2026-09-25 2

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that the appeal is fundamentally defective as the appellant had not specied the nature of the dispute to be arbitrated. In support of this argument, counsel cited section 6(1) of the Arbitration Act and County Government of Kirinyaga vs. African Banking Corporation Ltd [2020] eKLR to emphasize that the party seeking arbitration must clearly specify the nature of the dispute. 9. Secondly, counsel asserted that the actual relationship between the parties was that of an employer and employee, characterized by control, salary payment and statutory deductions, and that the respondent’s claim which mainly seeks a declaration that the relationship between the parties is that of employer and employee falls under the exclusive jurisdiction of the ELRC pursuant to section 12(3) of the Employment and Labour Relations Court Act and thus the remedy sought by the respondent is not grantable by an arbitrator. 10. Thirdly, counsel submitted that the arbitration clause was unconscionable, since the respondent had not attempted prior dispute resolution as was required. Buttressing this submission, counsel cited Nyutu Agrovet Limited vs. Airtel Networks Limited [2015] eKLR to argue that arbitration is consensual and cannot be imposed, particularly where bargaining power is unequal. 11. Fourthly, counsel for the respondent argued that referring the matter to arbitration would be contrary to public policy, as it would sanitize the appellant's alleged exploitative practices and tax evasion. 12. Finally, counsel submitted that the arbitration clause was no longer functional because the Agreement had been terminated. 13. We were, therefore, asked to dismiss the appeal, uphold the jurisdiction of the ELRC, and decline to enforce the arbitration clause. 14. As this is a rst appeal, we are called upon to review the facts and law afresh and come to our own independent conclusions. In doing so, we should not interfere with the nding of facts by the trial court unless they were based on no evidence, on a misapprehension of the evidence, or unless the trial Judge is shown demonstrably to have acted on wrong principles in reaching her ndings - see Selle vs. Associated Motor Boat Co. Limited (1968) EA 123. 15. In our view, a determination as to whether the learned Judge properly exercised her discretion in disallowing the application settles this appeal. We will address the parties' arguments within this context. 16. There is no dispute regarding the existence of a Letter of Appointment dated 15th June 2017, which is to be read together with the Agreement dated 23rd February 2018. At the centre of the dispute is Article VIII (iv) of the Agreement, which states as follows: “ iv. Settlement of disputes If at any time during the continuance of this Agreement any dispute, dierence or question-relating to the construction meaning or eect of this Agreement or of any clause herein shall arise between the parties, then the aggrieved or aected party shall give written notice of no less than 21 days to the other party herein. Each party shall within fourteen days of the date of expiry of the written notice aforementioned appoint an arbitrator. The matter shall thereafter be referred to the two arbitrators. If any party shall fail to appoint an arbitrator within the given fourteen days, then such arbitrator as shall be appointed by the other party shall be the sole arbitrator for the purpose of the hearing and determination of the matter in accordance with and subject to the Arbitration Act (1995) or any amendment or re- enactment for the time being in force. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1763/eng@2026-09-25 3

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Where the need so arises, the arbitrators may appoint an umpire who shall determine such issues as shall be referred to him/her by the arbitrators. The award of the arbitrator(s) shall be conclusive as to the rights of the parties and no recourse shall be had to a court of law save on a matter of legal interpretation. The parties will apportion equally such costs of the arbitration including the fees to the arbitrators and umpire. Each party shall bear its own legal and other representation costs.” 17. Similarly, relevant to the dispute herein is the provision of section 6(1) of the Arbitration Act, which provides as follows: “ A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or otherwise acknowledges the claim against which the stay of proceedings is sought, stay the proceedings and refer the parties to arbitration unless it nds a. that the arbitration agreement is null and void, inoperative or incapable of being performed; or b. that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.” 18. This Court has on numerous occasions, including in National Bank of Kenya Ltd vs. Pipeplastic Samkolit (K) Ltd & Another [2001] KECA 362 (KLR) and Nyutu Agrovet Limited vs. Airtel Networks Kenya Ltd [2024] KECA 523 (KLR), held that parties to a contract are bound by the terms of the contract they willingly entered into. A court has no jurisdiction to rewrite the terms of a contract entered by parties unless it is shown that the contract was vitiated by coercion, fraud or undue inuence, which factors must be pleaded and proved. In this case, there is no doubt that the parties entered into the Agreement, which, at Article VIII (iv), provides for remittance of any dispute between the parties to arbitration. 19. The main issue, however, is whether the provision is still operational. The respondent contends that the clause was only in operation during the subsistence of the contract and that at the time the dispute arose, the contract had been terminated. We respectfully do not agree with this view. In so stating, we point out that a reading of the respondent’s memorandum of claim reveals that it is predicated on the terms of the Agreement. It is the said contract that the respondent seeks the trial court to interpret so as to give eect to his rights as an employee of the appellant. In our view, the interpretation sought by the respondent in his claim relates to the rights which would accrue to him within the context and provisions of the contract. In essence, the contract would be interpreted as if it were in existence before such rights are ascertained. The Court (Nyamu, JA) in Safaricom Limited vs. Ocean View Beach Hotel Limited & 2 Others [2010] KECA 346 (KLR), held that where there is an arbitration clause, the arbitrator has the jurisdiction to rule on the validity or otherwise of the arbitration clause. In that regard, he opined that: “Under the doctrine of Kompetenz/Kompetenz a tribunal can rule on both the validity of the arbitral clause and the underlying contract. In the circumstances of the matter before us, once appointed it would for example be entitled to rule on who are the parties to the arbitration agreement and on the validity of the agreement to lease and whether it has jurisdiction over the other two respondents who contend that they are not parties to the agreement to lease. The Commercial Court has no business acting against an Act of https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1763/eng@2026-09-25 4

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Parliament and ruling on a matter it was not competent to rule on in law. Such a ruling is a nullity period.” Therefore, that ground of objection by the respondent lacks merit. 20. 21. We now turn to the appellant's appeal. According to Ms. Githu, the learned Judge erred in holding that there was no dispute to be referred to arbitration and that the appellant had not identied with precision the dispute that was to be referred to arbitration. The Court in UAP Provincial Insurance Company Ltd vs. Michael John Beckett [2013] KECA 205 (KLR) dealt with the construction of section 6(1) of the Arbitration Act as well as the breadth and depth of a court’s inquiry when faced with an application for stay under the said provision, and held that: “16 …. Section 6 of the Arbitration [Act] provides an enforcement mechanism to a party who wishes to compel an initiator of legal proceedings with respect to a matter that is the subject of an arbitration agreement to refer the dispute to arbitration. … 17. It is clear from this provision that the enquiry that the court undertakes and is required to undertake under section 6(1)(b) of the Arbitration Act is to ascertain whether there is a dispute between the parties and if so, whether such dispute is with regard to matters agreed to be referred to arbitration. In other words, if as a result of that enquiry the court comes to the conclusion that there is indeed a dispute and that such dispute is one that is within the scope of the arbitration agreement, then the court refers the dispute to arbitration as the agreed forum for resolution of that dispute. If on the other hand the court comes to the conclusion that the dispute is not within the scope of the arbitration agreement, then the correct forum for resolution of the dispute is the court. 18. The inquiry by the court with regard to the question whether there is a dispute for reference to arbitration, extends, by reason of Section 6(1)(b), to the question whether there is in fact, a dispute. In our view, it is within the province of the court, when dealing with an application for stay of proceedings under section 6 of the Arbitration Act, to undertake an evaluation of the merits or demerits of the dispute. In dealing with the application for stay of proceedings and the question whether there was a dispute for reference to arbitration, Mutungi J. was therefore within the ambit of section 6(1)(b) to express himself on the merit or demerit of the dispute. Indeed, in dealing with a Section 6 application, the court is enjoined to form an opinion on the merits or otherwise of the dispute.” The Court went ahead to liken section 6(1)(b) of the Arbitration Act to section 1(1) of the Arbitration Act, 1975 of England, before its amendment by the Arbitration Act, 1996. In doing so, the Court referred to the holding in Halki Shipping Corp. vs. Sopex Oils Ltd [1997] 3 ALL ER 833 that: “ The words used in clause 9 of the charterparty in relation to a referral to arbitration were “any dispute.” The words in section 1 (1) of the Act of 1975 are: “there is not in fact any dispute between the parties.” To the layman it might appear that there is little if any dierence between those words. However the legislature saw t to draft section 1 using the phrase “not in fact any dispute.” The legislature did not use the words “there is no dispute” and consequently a meaning must be given to those words and the courts have https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1763/eng@2026-09-25 5

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done so, although there is no general agreement as to what they mean. The distinction between the two phrase “any dispute” and “not in fact any dispute” is of central importance in understanding what underlies the cases that preceded the Act of 1996. To a large extent as a matter of policy to ensure that English law provided a speedy remedy by way of Order 14 proceedings for claimants who made out a plain case for recovery, and to prevent debtors who had no defence to the claim using arbitration as a delaying tactic, the words “not in fact any dispute” as opposed to “no dispute” have from time to time been interpreted by the courts as meaning “no genuine dispute,” “no real dispute,” “a case to which there is no defence,” “there is no arguable defence”, and later a case to which there is no answer as a matter of law or as a matter of fact, that is to say that the sum claimed “is indisputably due.” The approach of the courts has on occasions been similar to that adopted by them in Order 14 proceedings in cases where there is no arbitration clause. In recent times, this exception to the mandatory stay has been regarded as the opposite side of the coin to the jurisdiction of the court under R.S.C., Ord. 14, to give summary judgment in favour of the plainti where the defendant has no arguable defence.” 22. We fully associate with the foregoing views on how courts must approach an inquiry under section 6(1) of the Arbitration Act. We are also in agreement that a court in addressing its mind to an application under the section must address its mind to the question as to whether there is in fact a dispute between the parties that can be referred to arbitration. 23. The learned Judge in her ruling found that the relationship between the appellant and the respondent was governed by a dierent contract other than the Agreement. However, upon perusal of the statement of claim and the whole record, we nd that the subject matter of the claim stems from the Agreement. The dispute, as framed by the respondent, sought to establish the relationship between the parties following the termination of the Agreement. It is not lost on us that the relationship was initiated by and was to be governed by the terms of the Agreement. In our view, therefore, there was a dispute concerning the terms and interpretation of the Agreement. 24. The other complaint by the respondent was that the appellant had not met the preconditions in the arbitration clause. Our preliminary view on this issue is that non-compliance with a procedural precondition in an arbitration clause does not automatically render the clause inoperative or the dispute non-arbitrable. Such procedural defaults are matters best left to the arbitrator’s initial determination. 25. Another issue raised by the respondent is that a prayer for a declaration of an employment relationship falls within the exclusive jurisdiction of the ELRC under section 12 of the Employment and Labour Relations Court Act, and is thus beyond an arbitrator’s remit. This argument, while it appears persuasive at rst appearance, does not withstand scrutiny. The existence of a statutory jurisdiction in one forum does not, by itself, invalidate a freely entered arbitration agreement between parties. A dispute cannot be said not to fall within the arbitration orbit merely because it touches on statutory rights; what matters is whether the parties agreed to submit their dispute to arbitration. In our view, claims arising under the Employment Act can be subject to arbitration if the agreement so provides, provided the arbitration process itself is not shown to be incapable of protecting those statutory rights. The respondent has not demonstrated that the arbitral process would be inherently prejudicial or incapable of granting appropriate relief, including a declaration as to the nature of the relationship. The arbitrator is empowered to interpret the Agreement, apply the relevant provisions of the Employment Act, and make a binding determination on the true character of the engagement between the parties. https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1763/eng@2026-09-25 6

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26. In short, the appeal is for allowing and is hereby allowed. The ruling delivered on 19th November 2021 in Nairobi ELRC Cause No. E6462 of 2020 is hereby set aside and substituted with an order allowing the appellant’s Chamber Summons dated 29th January 2021. 27. For clarity, we issue orders as follows: 28. a. The proceedings in Nairobi ELRC Cause No. E6462 of 2020 are stayed pending the reference of the dispute to arbitration in accordance with Clause VIII (iv) of the Young Dealer Marketing Licence Agreement dated 23rd February 2018. b. The parties shall, within sixty (60) days from the date of this judgment, take all necessary steps to commence and constitute the arbitral process. c. The parties shall bear their own costs of the appeal. It is so ordered. DATED AND DELIVERED AT NAIROBI THIS 25TH DAY OF SEPTEMBER 2026. W. KARANJA JUDGE OF APPEAL .................................... A. O. MUCHELULE JUDGE OF APPEAL .................................... W. KORIR JUDGE OF APPEAL I certify that this is a True copy of the original Signed DEPUTY REGISTRAR https://new.kenyalaw.org/akn/ke/judgment/keca/2026/1763/eng@2026-09-25 7

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