Presbeta Investment Limited & another v National Bank of Kenya & 2 others [2016] KEELC 617 (KLR)
The bottom line
#A hotel buyer who hadn't paid the Kshs 150 million deposit lost its bid to stop an auction of the property, with costs.
What this practically means
#Executive summary
#Key legal issues
#Whether conservatory orders are available to private parties in arbitration-related civil proceedings
The proceedings are not ordinary civil proceedings but peculiar proceedings under section 7 of the Arbitration Act; the court may grant interim measures of protection, and the public-law character of conservatory orders does not bar the application
The court held that these proceedings were brought under section 7 of the Arbitration Act, which permits a party to request an interim measure of protection from the High Court before or during arbitral proceedings. The respondents' argument that conservatory orders are public-law remedies available only between public bodies was therefore misplaced; the correct framework is the interim-measures framework, not the public-law conservatory-order framework.
Whether the interim measures criteria under section 7 were satisfied
An arbitration agreement existed and the subject matter was under threat, but the special circumstances did not favour the Plaintiffs because their interest in the properties was negated by non-payment of the deposit; the application failed
Applying the Portlink/Safaricom criteria, the court found an arbitration agreement in Clause 14.2 and confirmed the auction placed the subject matter under threat. However, Clause 4.1.2 made payment of the Kshs. 150 million deposit due upon perfection of the purchaser's financier's security, and the caveat argument failed because caveats were registered on only two of six parcels. The Plaintiffs therefore failed to cement their interest, and no appropriate measure of protection was warranted.
Whether the suit against the 3rd Defendant (auctioneer as agent of a disclosed principal) should be struck out
The 3rd Defendant's objection could not be entertained because it was raised only through grounds of opposition and a preliminary objection in the form of submissions, without a formal application
Following Khunaif Trading Company Limited v Equity Bank Limited, the court adopted Kasango J.'s holding that a prayer to strike out a party is a substantial prayer that cannot be dealt with in submissions. The 3rd Defendant ought to have filed a formal application giving the Plaintiffs an opportunity to respond. The court accordingly declined to strike out the suit against the 3rd Defendant in the manner sought.
Whether the court should determine whether the 1st Defendant will be a party to the intended arbitration
That is an issue for the arbitrator, not for the court at the interim stage
The 1st Defendant contended it executed the Purchase Agreement only as chargee giving consent and was not a substantive party, so no dispute involving it could go to arbitration. The court held it was inappropriate at the interim stage to decide whether the 1st Respondent would be a party to the arbitration; that question must be left to the arbitrator once proceedings commence under the Purchase Agreement.
Legal principles established
#- The Giella v Cassman Brown injunction principles do not apply to applications for interim measures of protection under section 7 of the Arbitration Act; the Safaricom/Portlink principles govern instead
- An application to strike out a party from proceedings is a substantial prayer that cannot be dealt with in submissions or grounds of opposition; a formal application is required so the other side can respond
- Where the deposit payable under an asset purchase agreement was conditional upon perfection of security, and the security could not be perfected (or the condition was not fulfilled), the purchaser does not cement its interest in the suit properties
Court orders
#- 1.The Plaintiffs' notice of motion dated 30th May 2016 is dismissed with costs to the Defendants
- Jurisdiction invoked
- Section 7 of the Arbitration Act (interim measures of protection)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Presbeta Investment Limited & another v National Bank of Kenya & 2 others [2016] KEELC 617 (KLR)", Case Analysis (2016). Notice of motion dated 30th May 2016 (E&L Suit, Mombasa). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2016/617/eng@2016-08-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.