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Court of AppealPartially AllowedCivil Appeal No. 147 of 2019· [2020] KECA 266 (KLR)

Yooshin Engineeringcorporation v AIA Architects Ltd [2020] KECA 266 (KLR)

Court of Appeal
23 October 2020
William OukoW. OukoMartha Karambu KoomeM.K. KoomeDMD.K. Musinga
4,010 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~16 min to read original · ~4 min brief

The bottom line

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Kenya's Court of Appeal ruled that arbitration requests must be filed immediately with your court appearance, and injunctions require proof of irreparable harm, not just a strong case.

What this practically means

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Executive summary

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This appeal arose from a ruling of P.J. Otieno, J. of the High Court at Mombasa delivered on 23rd September 2019 in a dispute between two firms that had jointly bid for a Kenya Ports Authority tender for consultancy services relating to the Lamu Port. The trial court dismissed the appellant's preliminary objection seeking a stay and referral to arbitration under section 6(1) of the Arbitration Act because the objection was filed four days after entry of appearance, and granted most of the respondent's injunctive applications. The Court of Appeal, in a single judgment of the court delivered by Ouko, Koome and Musinga, JJ.A., partially allowed the appeal. On the arbitration issue, the Court held that a stay application under section 6(1) must be made by notice of motion supported by an affidavit attaching the arbitration clause, not by a preliminary objection, and must be filed not later than entry of appearance with no further procedural steps taken; the appellant also submitted to jurisdiction by asking the court to strike out the suit as frivolous and an abuse of process. On the injunctions, the Court found the trial judge had considered only the prima facie case limb of Giella v Cassman Brown, contrary to the requirement that the three limbs be applied sequentially as per Nguruman; since the respondent had quantified its claim, damages were an adequate remedy. The Court set aside all the injunctive orders, awarded the appellant half the costs of the appeal and of the High Court applications, and directed that the pending suit be heard on a priority basis.

Key legal issues

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01

Timing and mode of invoking section 6(1) of the Arbitration Act

Holding

A stay application under section 6(1) must be made by notice of motion, not a preliminary objection, and must be filed not later than entry of appearance; the appellant's objection filed four days later, with supporting replying affidavits taken in the interim, was out of time.

Reasoning

Rule 2 of the Arbitration Rules, 1997 requires applications under sections 6 and 7 to be made by summons in the suit, and Order 51 rule 1 of the Civil Procedure Rules requires applications to be by notice of motion, ideally supported by an affidavit attaching the arbitration agreement so the court can verify its existence and operativeness. The Court has severally held that section 6(1) must be construed strictly, and the preliminary objection here came four days after appearance.

p. 3
02

Mixed preliminary objections and submission to jurisdiction

Holding

A preliminary objection combining jurisdictional and non-jurisdictional grounds (that the suit is frivolous, vexatious and an abuse of process) amounts to submission to jurisdiction and estops the objector.

Reasoning

For the trial court to determine that the suit was bad in law, frivolous, vexatious and an abuse of process, it had to consider the substance and propriety of the suit, which are not jurisdictional questions. By requesting that inquiry the appellant submitted itself to the court's jurisdiction.

p. 3
03

Judicial discretion in granting interlocutory injunctions

Holding

The trial judge erred by granting injunctions after considering only the first Giella principle (prima facie case) and omitting irreparable loss and balance of convenience, which must be addressed sequentially; the Court of Appeal is entitled to interfere.

Reasoning

Following Nguruman, the three conditions are separate, distinct and logical hurdles to be surmounted sequentially; a prima facie case alone is insufficient where damages are an adequate remedy. The respondent's claim of Kshs.413,900,005 was quantified, so damages were adequate and no irreparable loss arose. All injunctive orders were therefore set aside.

p. 5

Legal principles established

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  • An application for stay of proceedings under section 6(1) of the Arbitration Act must be made not later than the time of entering appearance or otherwise acknowledging the claim, and by way of a formal notice of motion, not a preliminary objection; any other step in the proceedings forfeits the right.
  • A party who asks the court to determine the substance and merits of a suit (e.g. that it is frivolous or an abuse of process) in the same preliminary objection submits to the jurisdiction and is estopped from challenging it.
  • The Giella v Cassman Brown principles for interlocutory injunctions must be applied sequentially; a court may not grant an injunction on the basis of a prima facie case alone without considering irreparable harm.
  • Where an applicant has quantified its claim in damages, damages are an adequate remedy and no irreparable loss justifying an interlocutory injunction arises.

Court orders

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  1. 1.Set aside all the injunctive orders granted by the trial court
  2. 2.Award to the appellant one half of the costs of the appeal and of the High Court applications
  3. 3.Direct that the pending suit in the High Court be heard and determined on a priority basis

Authorities

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Legislation

  • Arbitration Actsection 6(1)
  • Arbitration RulesRule 2
  • Arbitration RulesRule 11
  • Civil Procedure Rules, 2020Order 51 rule 1
  • Civil Procedure Rules, 2020Order 51 rule 4
  • Constitution of KenyaArticle 159(2)(c)
  • Constitution of KenyaArticle 159(2)(d)
  • Public Procurement and Asset Disposal Actsection 157(9)

Cases cited (10)

  • Geoffrey M. Asanyo & 3 Others v Attorney General
    [2018] eKLR
  • Adrec Limited v Nation Media Group Limited
    [2017] eKLR
  • Mount Kenya University v Step Holding (K) Ltd
    [2018] eKLR
  • Kakuta Maimai Hamisi v Peris Tobiko & 2 Others
    [2013] eKLR
  • Owners of the Motor Vessel “Lillian S” v Caltex Kenya Ltd
    [1989] KLR 1
  • Charles Njogu Lofty v Bedovin Enterprises Ltd
    [2005] eKLR
  • United India Insurance Company Limited v East African Underwriters Kenya Ltd
    [1985] KLR 898
  • Giella v Cassman Brown & Co. Ltd
    [1973] E.A. 358
  • Nguruman Ltd v Jan Bonde Nielson & 2 Others
    [2014] eKLR
  • Kenya Commercial Finance Co. Ltd v Afraha Education Society
    [2001] Vol. 1 EA 86
On appeal from
High Court of Kenya at Mombasa
H.C.C. Suit No. 36 of 2019
Jurisdiction invoked
Section 72 of the Civil Procedure Act as read with the Court's appellate jurisdiction over interlocutory decisions of the High Court (second appeals lie to the Court of Appeal on matters of law)

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, "Yooshin Engineeringcorporation v AIA Architects Ltd [2020] KECA 266 (KLR)", Case Analysis (2020). Civil Appeal No. 147 of 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2020/266/eng@2020-10-23

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