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Court of AppealDismissedCivil Appeal No. 26 of 2007· [2013] KECA 205 (KLR)

UAP Provincial Insurance Company Ltd v Michael John Beckett [2013] KECA 205 (KLR)

Court of Appeal
4 October 2013
3,488 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Court of Appeal ruled that once parties settle a dispute, an arbitration clause cannot be used to dodge enforcing that settlement agreement.

What this practically means

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Executive summary

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This Court of Appeal judgment (Maraga, Ouko and Gatembu Kairu JJ.A.) dismissed UAP Provincial Insurance Company Ltd's appeal against a High Court ruling (Mutungi J., 27 April 2004) refusing to stay Beckett's suit for enforcement of a settlement agreement under section 6 of the Arbitration Act. Beckett had insured a vehicle with UAP; after the vehicle was stolen and the claim repudiated, Beckett was charged and acquitted of forgery offences, and the parties allegedly agreed to a settlement of Kshs. 6,000,000. When UAP failed to pay, Beckett sued to enforce the settlement. UAP sought a stay under the arbitration clause in the policy, arguing there were 'differences' between the parties and that the settlement was tainted with illegality. The Court of Appeal held that under section 6(1)(b) of the Arbitration Act the court must consider whether there is in fact a genuine dispute and may evaluate the merits of the alleged dispute, adopting English authority on the equivalent provision of the English Arbitration Act 1975. It affirmed that where parties have reached a settlement there is nothing to refer to arbitration, and that the suit was for enforcement of the settlement, not a policy dispute. Arguments that the settlement was a nudum pactum or illegal were not raised before the High Court and could not be entertained on appeal. The appeal was dismissed with costs to Beckett.

Key legal issues

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01

Scope of the court's enquiry under section 6(1)(b) of the Arbitration Act

Holding

The court must ascertain whether there is a dispute and whether it falls within the arbitration agreement; the words 'not in fact any dispute' require the court to consider whether there is a genuine dispute, and the court may evaluate the merits of the dispute.

Reasoning

Section 6(1)(b) of the Kenyan Act mirrors section 1(1) of the English Arbitration Act 1975. English authorities (Halki Shipping, Ellis Mechanical Services) interpreted the phrase 'not in fact any dispute' as meaning no genuine or real dispute, akin to summary judgment principles. The Court identified fully with those pronouncements and held that the judge was entitled to express himself on the merits when dealing with a section 6 application.

p. 4
02

Effect of a settlement agreement on a stay application

Holding

Where the suit is for enforcement of a settlement agreement, there is no dispute between the parties capable of being referred to arbitration and the arbitration clause is no bar to the action.

Reasoning

The High Court found UAP had agreed to settle Beckett's claim for Kshs. 6,000,000. The Court of Appeal agreed that the suit was for enforcement of that settlement, so Beckett's right to payment was not a matter agreed to be referred to arbitration. The existence of an arbitration clause in the policy did not bar the action on the admitted claim.

p. 6
03

Illegality and nudum pactum arguments raised for the first time on appeal

Holding

A party cannot fault a judge for not considering matters that were not raised before him; the illegality and nudum pactum arguments were not canvassed before the High Court and were unavailable on appeal.

Reasoning

UAP argued the settlement agreement was tainted with illegality and was a nudum pactum. Beckett countered these arguments were not raised before the High Court. The Court accepted that position, holding the learned judge could not be faulted for not considering matters not raised before him, and therefore declined to entertain the new arguments.

p. 6

Legal principles established

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  • Under section 6(1)(b) of the Arbitration Act, the court must consider whether there is in fact a genuine dispute between the parties before staying proceedings, and may evaluate the merits of the alleged dispute.
  • Where parties have reached a settlement, there is nothing to be referred to arbitration and a stay under section 6 will be refused.

Court orders

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  1. 1.The appeal is dismissed with costs

Authorities

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Legislation

  • Arbitration Actsection 6(1)(b)
  • Arbitration Actsection 6
  • Penal Codesection 357(a)
  • Penal Codesection 313
  • Arbitration Act, 1975 (England)section 1(1)
  • Arbitration Act, 1996 (England)

Cases cited (4)

  • Provincial Insurance Co of East Africa v Kivuti
    [1995-1998] 1 EA 283
  • Abdul Aziz Suleiman v South British Insurance Co. Ltd.
    Civil Appeal No. 779 of 1964 [1965] E.A. 66
  • Halki Shipping Corpn v Sopex Oils Ltd
    [1998] 1 WLR 726
  • Ellis Mechanical Services Ltd v Wates Construction Ltd (Note)
    [1978] 1 Lloyd's Rep 33
On appeal from
High Court of Kenya at Nairobi, Milimani Commercial Courts
Civil Case No. 1310 of 2001
Jurisdiction invoked
First appeal to the Court of Appeal against an interlocutory ruling of the High Court (statutory right of appeal; no specific constitutional provision cited)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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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, "UAP Provincial Insurance Company Ltd v Michael John Beckett [2013] KECA 205 (KLR)", Case Analysis (2013). Civil Appeal No. 26 of 2007. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2013/205/eng@2013-10-04

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