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Court of AppealPartially AllowedCivil Appeal No. 98 of 2016· [2020] KECA 401 (KLR)

Ezra Odondi Opar v Insurance Company of East Africa Ltd [2020] KECA 401 (KLR)

Court of Appeal of Kenya
7 August 2020
3,924 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 confirmed that only the part of an arbitration award exceeding the arbitrator's mandate can be set aside, preserving the valid vehicle value award.

What this practically means

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Executive summary

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This Court of Appeal at Kisumu judgment arises from an appeal by Ezra Odondi Opar against a High Court ruling of 18th May 2016 (Chemitei, J.) which allowed the Insurance Company of East Africa Ltd to set aside an arbitral award of 13th August 2004. The arbitrator had awarded the appellant Kshs.484,500.00 as the value of his insured vehicle destroyed by fire, Kshs.2,095,000.00 for loss of use, interest and costs. The company's first setting-aside application was dismissed by Kubo, J. in 2006 as premature because costs of the arbitration remained unresolved; after the parties consented on costs in December 2006, the award was adopted as a judgment, later stayed. The company then filed Misc. Civil Application No. 213 of 2015 seeking adoption of the consent and setting aside of the award, which the High Court allowed in its entirety. The Court of Appeal held that the Judge could not be faulted for entertaining the application since no sub judice objection was raised before him, and that the application was not out of time because the arbitral process could only be deemed complete upon adoption of the consent on costs. However, the Court agreed that the award for loss of use, being expressly excluded consequential loss, fell outside the scope of the reference and was severable under Section 35(2)(a)(iv) of the Arbitration Act. The Court modified the High Court decision: the setting-aside was confined to the loss-of-use award and interest, while the award of Kshs.484,500.00 with interest at 14% p.a. was upheld. Each party was ordered to bear its own costs of the appeal.

Key legal issues

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01

Whether the sub judice doctrine barred the High Court from entertaining the application to set aside the award

Holding

The Judge cannot be faulted for entertaining the application because no objection on the basis of pending proceedings was raised before him.

Reasoning

The doctrine of sub judice in Section 6 of the Civil Procedure Act is intended to prevent courts of concurrent jurisdiction from simultaneously trying parallel suits. It is incumbent on a party who wishes to rely on it to seek consolidation, seek a stay of proceedings, or object before the trial court. A judge cannot be blamed for failing to address a matter that was never raised before him; only a fleeting reference to other proceedings appeared in the appellant's written submissions.

p. 4
02

Whether the application to set aside the arbitral award was out of time under Section 35(3) of the Arbitration Act

Holding

The application was not out of time; the respondent's initial application under Section 35(3) was made within three months but was held premature, and time could only be reckoned from completion of the arbitral proceedings upon adoption of the consent on costs.

Reasoning

Section 35(3) bars a setting-aside application made more than three months after receipt of the award, reflecting expedition and finality in arbitration. The respondent's first application dated 3rd September 2004 was within time but Kubo, J. dismissed it as premature because the issue of costs remained unresolved. In view of that direction, Chemitei, J. was entitled to treat the adoption of the consent on costs as completing the arbitral process, which in effect extended the time for the subsequent setting-aside application.

p. 5
03

Whether the arbitrator exceeded his jurisdiction in awarding damages for loss of use of the vehicle

Holding

Yes. The award of Kshs.2,095,000.00 for loss of use was beyond the scope of the policy, which expressly excluded consequential loss, and was liable to be set aside under Section 35(2)(a)(iv) of the Arbitration Act.

Reasoning

The arbitration clause limited the arbitrator's authority to differences arising out of the policy. The policy indemnified only for loss or damage to the motor vehicle and expressly excluded consequential loss. The award for loss of use, and the interest awarded on it, fell outside the scope of the reference and was severable from the rest of the award, so it alone should have been set aside; the award of Kshs.484,500.00 as the value of the insured vehicle remained valid.

p. 6
04

Whether the respondent was estopped from asserting that the arbitrator exceeded his jurisdiction

Holding

The court did not uphold the estoppel contention, since the Judge correctly found the loss-of-use award to be beyond the arbitrator's mandate.

Reasoning

The appellant argued that the respondent was estopped from challenging the arbitrator's jurisdiction. The court reviewed the policy terms and relevant case law and concluded that the loss-of-use claim was expressly excluded from the policy, so the High Court Judge correctly found that the award on that head was beyond the scope of the reference to arbitration and severable; the estoppel complaint therefore did not save that part of the award.

p. 6

Legal principles established

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  • An arbitral award may be set aside under Section 35(2)(a)(iv) of the Arbitration Act to the extent that it deals with a dispute not contemplated by, or falling outside the terms of, the reference to arbitration, and such an award is severable so that only the offending part is set aside.
  • The three-month period under Section 35(3) of the Arbitration Act for setting aside an award is consistent with the principle of expedition and finality in arbitration, but where an earlier court ruling directs that the issue of costs be concluded before any challenge to the award, time cannot practically be reckoned from receipt of the award.

Court orders

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  1. 1.The order for the adoption of the consent on costs dated 11th December 2006 and for the arbitral proceedings to be deemed as completed upon such adoption is upheld
  2. 2.The award of damages by the arbitrator in favour of the appellant for Kshs.2,095,000.00, and interest thereon for loss of use of the insured vehicle, is set aside
  3. 3.The award in favour of the appellant for the value of the insured vehicle lost in the fire of Kshs.484,500.00, and interest thereon at the rate of 14% p.a from the date of the arbitral award, is upheld
  4. 4.Each party shall bear its own costs of the appeal
On appeal from
High Court of Kenya at Kisumu
Misc. Civil Case No. 213 of 2015
Jurisdiction invoked
First appeal to the Court of Appeal from a ruling and order of the High Court at Kisumu in Misc. Civil Case No. 213 of 2015

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, "Ezra Odondi Opar v Insurance Company of East Africa Ltd [2020] KECA 401 (KLR)", Case Analysis (2020). Civil Appeal No. 98 of 2016. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2020/401/eng@2020-08-07

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