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Court of AppealDismissedCivil Appeal 8 of 2018· [2022] KECA 812 (KLR)

Golden Jubilee Limited v Misty Jadva Parbat & Company Limited

Court of Appeal
28 April 2022
3,950 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 missing a construction contract's 14-day arbitration window after the final certificate makes that certificate final, blocking later set-off claims.

What this practically means

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Executive summary

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The appellant and respondent entered two construction contracts in 2007 for works on LR Numbers 209/6265 and 6266, containing clauses on substantial completion certificates, liquidated and ascertained damages of KShs. 700,000 per week, the conclusiveness of the architect's final certificate (Clause 30.7), and arbitration of disputes (Clause 40). The respondent sued in HCCC No. 608 of 2014 for certified sums of about KShs. 28.9 million plus interest, claiming final accounts had been signed in October 2013. The appellant, without entering appearance, moved under sections 2 and 6 of the Arbitration Act for a stay and referral to arbitration; the respondent applied for summary judgment. Ochieng, J dismissed the appellant's motion and entered summary judgment, holding the final certificate was final and conclusive and no referable dispute existed. The Court of Appeal, on a first appeal by way of retrial, framed two issues: whether a dispute existed requiring arbitration under Clause 40, and whether the appellant's set-off or counterclaim had fallen due. The Court held that Clause 30.7 confines arbitration to before issuance of the final certificate or within 14 days thereafter; neither party invoked arbitration in that window, so the certificates became conclusive and the appellant's bare letter of demand could not constitute a dispute. The alleged liquidated damages were never ascertained by certification as Clauses 22 and 30 required, so no set-off had accrued. The appeal was dismissed, the High Court ruling upheld, with costs of the appeal to the appellant.

Key legal issues

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01

Existence of a dispute referable to arbitration under Clause 40

Holding

No dispute or difference existed capable of arbitration because the final certificates were conclusive under Clause 30.7 and no timely reference was made.

Reasoning

Clause 30.7 contemplates arbitration only before issuance of the final certificate, or within 14 days thereafter. Neither party sought arbitration in that window. The certificates therefore became conclusive evidence that the works were properly carried out and that all contractual adjustments had been made, shutting out later set-off or counterclaim claims and leaving no referable dispute.

p. 6
02

Whether the appellant's alleged set-off or counterclaim had fallen due

Holding

The set-off had not accrued because the liquidated damages were never ascertained by architect's certification as the Contract required.

Reasoning

Under Clauses 22 and 30, any claim by the owner for non-completion damages requires verification or ascertainment by certification, just as the contractor's claims require final certificates. The appellant's letter of 15th April 2014 was a bare demand without certification and could not found a set-off or counterclaim, nor constitute a dispute for arbitration under Clause 40.1.

p. 7
03

Duty of the Court of Appeal on a first appeal

Holding

As a first appeal, the Court re-assesses the evidence on record and reaches its own conclusions.

Reasoning

Citing Selle v Associated Motor Boat Co. as adopted in Arthi Highway Developers, the Court restated that an appeal from the High Court is by way of retrial: the Court must reconsider and evaluate the evidence itself, while making allowance for not having seen or heard the witnesses, and is not bound by the trial judge's findings of fact.

p. 6

Legal principles established

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  • Where a construction contract makes the architect's final certificate conclusive evidence absent a timely reference to arbitration, a party who fails to invoke arbitration within the contractual window cannot later rely on a bare written demand as a 'dispute' to defeat summary judgment or trigger a stay under section 6 of the Arbitration Act.
  • A set-off of liquidated and ascertained damages under a construction contract accrues only upon certification by the architect; an uncertified written demand does not constitute an ascertained cross-claim.

Court orders

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  1. 1.The appellant's appeal be and is hereby dismissed
  2. 2.The Ruling and order of the High Court (Fred A. Ochieng, J) delivered on 8th June 2016 is hereby upheld
  3. 3.The costs of this appeal be borne by the appellant

Authorities

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Legislation

  • Arbitration Act, 1995 (Revised 2019)section 3
  • Arbitration Act, 1995 (Revised 2019)sections 2 and 6
  • Arbitration Act, 1995 (Revised 2019)section 10
  • Arbitration Rules, 1997
  • Civil Procedure Actsections 1A, 1B and 3A

Cases cited (4)

  • Arthi Highway Developers Limited v West End Butchery Limited and 6 others
    [2015] eKLR

    First appeal is by way of retrial; Court must re-assess evidence and reach its own conclusions.

  • Selle v Associated Motor Boat Co.
    [1968] EA p.123

    Principles governing a first appeal by way of retrial.

  • Modern Engineering v Gilbert Ash
    [1974] AC p.689

    Definition of set-off as an equitable remedy where a cross-claim arising from the same transaction acts as a defence.

  • Hosier and Dickinson Ltd v P and M Kaye Ltd
    [1971] 1 All ER p.301

    Architect's certificate is conclusive evidence that work was properly carried out and completed per the contract.

On appeal from
High Court of Kenya at Nairobi
High Court Civil Case No. 608 of 2014
Jurisdiction invoked
First appeal to the Court of Appeal under the Court of Appeal jurisdiction (Constitution Article 164; appeal from High Court ruling in HCCC No. 608 of 2014)

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, "Golden Jubilee Limited v Misty Jadva Parbat & Company Limited", Case Analysis (2022). Civil Appeal 8 of 2018. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/812/eng@2022-04-28

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