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Court of AppealDismissedCivil Appeal 8 of 2018· [2022] KECA 905 (KLR)

Golden Jubilee Limited v Misty Jadva Parbat & Company Limited

Court of Appeal
28 April 2022
KMK M'InotiKLKi LaibutaHOH M Okwengu
3,949 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 once a construction contract's final certificates issue and the arbitration window closes, you cannot later force the dispute to arbitration.

What this practically means

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Executive summary

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The parties entered into two construction contracts in 2007 for works on LR Numbers 209/6265 and 6266, including completion and finishing of a hotel structure. The contracts contained clauses on substantial completion certificates, liquidated and ascertained damages of KShs. 700,000 per week for non-completion, finality of the architect's final certificate (Clause 30.7), and arbitration of disputes (Clause 40). The respondent contractor sued for certified sums of about KShs. 28.9 million plus interest. The appellant, without entering appearance, moved under sections 2 and 6 of the Arbitration Act for a stay and referral to arbitration, contending it was owed KShs. 8,055,087 in liquidated damages for delayed completion, which it sought to set off. The High Court (Ochieng, J) dismissed the motion and entered summary judgment for the respondent, holding the final certificate was final and conclusive and left no referable dispute. The Court of Appeal dismissed the appeal. It held that Clause 30.7 permits arbitration only before the final certificates issue (or within 14 days thereafter), and since neither party sought arbitration in that window, the certificates became conclusive and no dispute was referable. It further held that a set-off of liquidated and ascertained damages accrues only upon architect certification, which the appellant never obtained. The High Court ruling was upheld, with costs of the appeal to the appellant.

Key legal issues

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01

Existence of a referable dispute under the arbitration clause

Holding

No dispute or difference capable of submission to arbitration arose because the final certificates were conclusive and no arbitration request was made within the contractual window.

Reasoning

Clause 30.7 permits referral to arbitration only before the final certificates issue, or by the contractor within 14 days after issue. Neither party invoked arbitration in that window. The certificates therefore became conclusive evidence that the works were properly carried out and that all adjustments to the contract sum had been made, shutting out later disputes.

p. 6
02

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

Holding

The set-off/counterclaim for liquidated and ascertained damages had not accrued because the sums were never certified by the architect as the Contract required.

Reasoning

Under Clauses 22 and 30.1(a), claims crystallise upon final certification by the architect. The word 'ascertained' requires certification by the architect, not unilateral assertion by the owner. The appellant obtained no certificate independent of, or in reduction of, the sums certified as payable to the respondent, so its bare letter of demand could not sustain a set-off.

p. 7

Legal principles established

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  • Where a construction contract requires final certification before referral to arbitration, once final certificates issue and no dispute is referred within the stipulated period, the certificates are conclusive evidence and no dispute remains referable to arbitration.
  • A set-off of liquidated and ascertained damages under a construction contract accrues only upon certification by the architect; an uncertified written demand cannot found a set-off or counterclaim.
  • On a first appeal, the Court of Appeal must re-assess the evidence on record and reach its own conclusions.

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; the appellate 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: reconsider and evaluate the evidence and draw independent conclusions.

  • 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 in accordance with 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's appellate jurisdiction (Constitution Article 164); appeal from a 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/2022/905/eng@2022-04-28

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