Laiser Communications Limited & 5 others v Safaricom Limited [2016] KECA 145 (KLR)
The bottom line
#Kenya's Court of Appeal let six Safaricom dealers sue in court instead of arbitrating, because the arbitration clause paired with a tiny liability cap was unfair.
What this practically means
#Executive summary
#Key legal issues
#Whether the discretionary ('may') language of clause 22.2 of the dealer agreement made arbitration optional
The court found the parties contemplated arbitration in the first instance but, absent a mutual agreement on the mode of arbitration and given the appellants' election to go to court, the appellants were entitled to their day in court.
The dealer agreement used permissive language ('may elect to commence arbitration') and allowed resort to court. Since the parties had not agreed on arbitration modalities and the respondent demonstrated no measures taken towards arbitration, the appellants, as the aggrieved party, could properly move the court rather than be compelled into arbitration.
Whether fraud allegations oust arbitral jurisdiction
Mere allegations of fraud do not remove an arbitrator's jurisdiction; the arbitrator may determine whether fraud is established.
Relying on Telkom Kenya Ltd v Kam Consult Ltd, the court accepted that a mere allegation of fraud, however mischievous, cannot oust the arbitrator's jurisdiction; it would only be against public policy to enforce an arbitration clause where fraud is actually established after hearing evidence.
Whether the Kshs 100,000 liability cap made the arbitration clauses oppressive and repugnant to justice
Enforcing the arbitration clauses alongside the limitation-of-liability clause would seriously impede the appellants' access to justice, given the large sums claimed, and the clauses were therefore oppressive and would lead to injustice.
Clause 17.2 capped Safaricom's liability at Kshs 100,000 with short limitation periods, while the appellants claimed massive losses. Enforcing arbitration under such terms would give the respondent the upper hand, amounting to undue influence and unfair bargaining power, rendering arbitration oppressive and repugnant to justice.
The role of this Court on a first appeal
On a first appeal the Court must re-evaluate, re-assess and re-analyze the record and determine whether the conclusions of the trial judge are correct.
The Court invoked its established first-appeal function, citing Abok James Odera T/A A.J Odera & Associates v John Patrick Machira, to frame its task as independently reviewing the trial court's conclusions before interfering.
Legal principles established
#- An arbitration clause that is oppressive or repugnant to justice, such as one coupled with a liability cap that disadvantages one side, should not be enforced and proceedings may proceed in court.
- The mere allegation of fraud does not oust an arbitrator's jurisdiction; the arbitrator may hear evidence and determine whether fraud is established.
- A reference to arbitration does not automatically defeat constitutional guarantees of access to justice; arbitration is complementary to formal dispute resolution.
Court orders
#- 1.Appeal allowed as prayed
- 2.Ruling and order of Musinga J. staying the High Court proceedings pending arbitration set aside
- 3.Each party to bear its own costs of the appeal
- On appeal from
- High Court of Kenya at Nairobi
- H.C.C.C. No 196 of 2011
- Jurisdiction invoked
- First appeal to the Court of Appeal under the Constitution of Kenya, 2010 and the Court of Appeal's appellate jurisdiction (Article 159 invoked on ADR); no specific provision stated in the judgment
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Laiser Communications Limited & 5 others v Safaricom Limited [2016] KECA 145 (KLR)", Case Analysis (2016). Civil Appeal No 247 of 2012. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2016/145/eng@2016-11-04
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.