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Court of AppealAllowedCivil Appeal 160 of 2019· [2022] KECA 1264 (KLR)

African Service Maintenance Limited v Comarco Supply Base (EPZ) Limited & another

Court of Appeal
18 November 2022
3,286 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~13 min to read original · ~4 min brief

The bottom line

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A company that wanted arbitration instead filed the wrong court document, so it lost that right and must now defend the case in Kenya's High Court.

What this practically means

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Executive summary

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The appellant, African Service Maintenance Limited, sued Comarco Supply Base (EPZ) Limited and Purma Holdings Limited in the High Court at Mombasa for damages arising from delayed shipment of maize under two charterparty agreements and a subsequent tripartite agreement on demurrage. Comarco filed a preliminary objection contending that the charterparty agreements provided for English law and London arbitration, ousting the High Court's jurisdiction. The trial judge (N. Mwangi, J.) upheld the objection in part, striking out the suit against Comarco while maintaining it against Purma. The Court of Appeal (Murgor, Nyamweya and Lessit, JJA) allowed the appeal. It held that under section 6(1) of the Arbitration Act, a party invoking an arbitration agreement must apply, by notice of motion, for stay of proceedings not later than when it enters appearance. Comarco instead filed a preliminary objection which compelled the court to evaluate facts - whether the charterparty or tripartite agreements governed - so the objection failed the Mukisa Biscuit threshold. By asking the court to delve into the substance and merits, Comarco submitted to the jurisdiction and was estopped from challenging it, thereby losing the right to rely on the arbitration clause. The Court also held that the trial court denied the appellant the right to be heard on the tripartite agreement, to which Comarco was also party. The Court reinstated the appellant's suit against the 1st respondent, to be heard by a judge other than N. Mwangi, J., and awarded costs to the appellant.

Key legal issues

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01

Compliance with section 6(1) of the Arbitration Act as a precondition to invoking arbitration

Holding

The 1st respondent, having filed a memorandum of appearance with a preliminary objection rather than a notice of motion for stay under section 6(1), waived its right to refer the dispute to arbitration and submitted to the court's jurisdiction.

Reasoning

Section 6(1) requires a party to apply for stay of proceedings not later than the time of entering appearance, by way of summons in the suit under rule 2 of the Arbitration Rules 1997 and by motion under Order 51 rule 1 of the Civil Procedure Rules. Filing a preliminary objection instead compelled the court to evaluate facts, taking the party beyond the scope of the Arbitration Act and constituting submission to jurisdiction.

02

Whether the preliminary objection met the Mukisa Biscuit threshold

Holding

The objection required the court to go beyond the scope of the Arbitration Act and the arbitration agreements and to evaluate facts, and therefore failed the threshold for a preliminary objection.

Reasoning

A valid preliminary objection must rest on a pure point of law without ascertainment of facts. Here the court had to discern whether the charterparty agreements or the tripartite agreement governed, which required factual evaluation, defeating the objection.

03

Right to be heard on the tripartite agreement

Holding

The trial court erred in striking out the claim against the 1st respondent, which was also party to the tripartite agreement, thereby denying the appellant the right to ventilate that dispute.

Reasoning

The 1st respondent was a party to the tripartite agreement; separating the claims and striking out the suit against it denied the appellant the right to be heard on disputes arising from that agreement, which contained no arbitration clause.

p. 6

Legal principles established

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  • A party who files a preliminary objection instead of an application for stay under section 6(1) of the Arbitration Act loses the right to rely on the arbitration clause and submits to the court's jurisdiction.
  • A preliminary objection requiring the court to evaluate facts does not meet the Mukisa Biscuit threshold.
  • Jurisdiction is a threshold issue that must be decided forthwith on the material before the court.

Court orders

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  1. 1.The appellant's suit against the 1st respondent in Mombasa High Court Commercial Case No 15 of 2018 be and is hereby reinstated, to be determined by another judge of the High Court other than N Mwangi, J.
  2. 2.Costs to the appellant

Authorities

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Legislation

  • Constitution of KenyaArticle 165
  • Constitution of KenyaArticles 47, 48 and 50
  • Arbitration Act No 4 of 1996section 6(1)
  • Arbitration Rules 1997rule 2
  • Civil Procedure Rules 2020Order 51 rule 1

Cases cited (7)

  • Mukisa Biscuit Manufacturing Co Ltd v West End Distributors
    [1969] EA 696

    Threshold for a valid preliminary objection - a pure point of law without ascertainment of facts.

  • Mbogo v Shah
    [1968] EA 93

    Appellate interference with discretionary decisions of the trial court.

  • Owners and Masters of The Motor Vessel "Joey" v Owners and Masters of The Motor Tugs "Barbara" and "Steve B"
    [2008] 1 EA 367

    Jurisdiction is a threshold issue to be decided forthwith on the material before the court.

  • Fairlane Supermarket Limited v Barclays Bank Limited
    Nai HCCC No 102 of 2011

    Cited with approval on loss of the right to rely on an arbitration clause.

  • Adrec Limited v Nation Media Group Limited
    [2017] eKLR

    Citing Corporate Insurance Company v Wachira on the requirement to apply for stay after entering appearance.

  • Corporate Insurance Company v Wachira
    (1955-1958) 1 EA 20

    Right to rely on arbitration clause lost by filing a defence instead of applying for stay.

  • Yooshin Engineering Corporation v AIA Architects Limited
    [2020] eKLR

    Filing a preliminary objection beyond an arbitration agreement amounts to submission to jurisdiction and estoppel.

On appeal from
High Court of Kenya at Mombasa
Mombasa High Court Commercial Case No. 15 of 2018
Jurisdiction invoked
Article 165 of the Constitution (first-instance jurisdiction) with the appeal under the Court of Appeal's appellate jurisdiction; Arbitration Act No 4 of 1996, section 6 central to the dispute

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, "African Service Maintenance Limited v Comarco Supply Base (EPZ) Limited & another", Case Analysis (2022). Civil Appeal 160 of 2019. Source: https://new.kenyalaw.org/akn/ke/judgment/keca/2022/1264/eng@2022-11-18

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