Esmailiji v Mistry Shamji Lalji & Co [1980] KECA 34 (KLR)
The bottom line
#Kenya's Court of Appeal refused to halt a court case because the employers had shown no real intention to arbitrate before being sued.
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 High Court judge properly exercised his discretion in refusing a stay of proceedings under section 6 of the Arbitration Act notwithstanding the arbitration clause 36 of the agreement.
- 2.Whether the employers satisfied the condition precedent in section 6 that they were, at the commencement of the proceedings and still remained, ready and willing to do all things necessary for the proper conduct of the arbitration.
- 3.Where the onus lies on an application for a stay of proceedings under an arbitration agreement.
- 4.Whether an advocate's affidavit could adequately depose to the applicant's readiness and willingness to arbitrate.
Key legal issues
#Whether the employers satisfied the statutory condition of readiness and willingness to arbitrate under section 6 of the Arbitration Act.
They did not. They never honoured or objected to the architect's certificates, never gave notice to concur in the appointment of an arbitrator, and first raised arbitration only after the suit was filed, which the court treated as an afterthought and delaying tactic.
The employers received two architect's certificates for Kshs 96,323 and neither honoured nor objected to them, and never gave the written notice to concur in the appointment of an arbitrator required by clause 36. Their advocates replied to the letter of demand four months after the first certificate merely threatening a defence, without seeking arbitration. Only on January 10, 1979, after entering appearance, did they refer to disputes and seek a stay. The court held the onus was on the employers and that their conduct negative any genuine readiness to arbitrate; knowledge of the clause did not relieve them of the requirement.
Where the onus lies on a stay application.
The party moving for a stay must show the dispute falls within a valid and subsisting arbitration clause; only then does the burden of showing cause shift to the opposing party. Here the onus shifted and the respondents discharged it.
Law JA, concurring, clarified his earlier observations in the Kenya Oil case, citing Willesford v Watson: the applicant for a stay must first establish that the dispute is within a valid and subsisting arbitration clause. In the Kenya Oil case that stage was never reached because the applicant failed that initial onus, so the burden never shifted. In the present case the onus did shift, and the judge correctly exercised his discretion on the balance of probabilities in favour of the respondent, a conclusion the Court of Appeal would not disturb.
Whether an advocate's affidavit sufficed to prove the employers' readiness and willingness to arbitrate.
It did not. The advocate swore only on information derived from the file and did not state that the employers had imparted their intention to him or that he believed it true; such an affidavit was insufficient.
The advocate deposed only that his statements were derived from the file submitted by the defendants and did not say the employers had imparted their intention to him, nor that he verily believed it, nor refer to a document from which it could be inferred. The course of events indicated the file contained no mention of arbitration. Beyond the question of the advocate's competence to swear the affidavit, it was insufficient; only the applicant himself can depose as to his own intention (Jessel MR in Piercy v Young). This alone justified refusing a stay.
Legal principles established
#- On an application to stay proceedings under section 6 of the Arbitration Act, the applicant must satisfy the court that he not only is, but also was at the commencement of the proceedings, ready and willing to do everything necessary for the proper conduct of the arbitration.
- The principles governing stay applications are those in The Eleftheria: the court has a discretion, to be exercised in favour of a stay unless strong cause is shown, the burden of proving strong cause being on the plaintiff, taking into account all the circumstances.
- A mere balance of convenience is not enough to justify a stay.
- Because the parties are bound by an arbitration clause, a party seeking a stay need not first have demanded arbitration; but the applicant bears the onus of showing past and present readiness and willingness to arbitrate, which a mere knowledge of the clause does not discharge.
- The party moving for a stay must first show that the dispute falls within a valid and subsisting arbitration clause (Willesford v Watson); once that is achieved, the burden of showing cause why effect should not be given to the arbitration agreement shifts to the party opposing the stay.
- An applicant's readiness and willingness to arbitrate is a matter of that applicant's own intention and must, in principle, be deposed to by the applicant personally, not by his advocate on information derived only from the file.
Court orders
#- 1.Appeal dismissed
- 2.Costs of the appeal awarded to the contractors (respondents)
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
Delivered a short concurring judgment agreeing with Madan JA and clarifying what he had said in the Kenya Oil case about the onus on an application for a stay.
I agree with the judgment delivered by Madan JA.p. 3
- On appeal from
- High Court of Kenya
- Not stated in the judgment
- Jurisdiction invoked
- Appeal to the Court of Appeal from the High Court's refusal of a stay of proceedings under section 6 of the Arbitration Act (cap 49); specific constitutional/statutory appellate provision not stated in the judgment.
Relief refused
#Stay of the High Court proceedings under section 6 of the Arbitration Act pending arbitration
The employers failed to satisfy the court that they were, at the commencement of the proceedings and still remained, ready and willing to do everything necessary for the proper conduct of the arbitration, and the contractors showed strong cause why the matter should not be referred to arbitration.
Costs
Appeal dismissed with costs to the respondents ("I would dismiss the appeal with costs. As Law and Miller JJA agree, it is so ordered.")
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 applicant must satisfy the court not only he is, but also that he was at the commencement of the proceedings ready and willing to do everything necessary for the proper conduct of the arbitration
The discretion should be exercised by granting a stay unless strong cause for not doing so is shown. (3) The burden of proving such strong cause is on the plaintiffs.
It is only when that has been achieved that the burden of showing cause why effect should not be given to the agreement to submit is upon the party opposing the application to stay.
It would seem that what is required is an affidavit by the applicant himself as he is the only person who can depose as to his intention.
I would dismiss the appeal with costs. As Law and Miller JJA agree, it is so ordered.
Issues in the judgment
#The judgment does not state the appeal number, case title of the parties by name, or the neutral citation; these fields could not be populated from the text.
The date of the advocates' reply letter is printed as 'July27, 1978' (missing space), an internal typographical irregularity.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Esmailiji v Mistry Shamji Lalji & Co [1980] KECA 34 (KLR)", Case Analysis (1980). Not stated in the judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/1980/34/eng@1980-02-06
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.