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ELCAllowedNairobi ELC Case No. 679 of 2016 (Lead File), consolidated with ELC Nos. 517 of 2014 and 519 of 2014· [2017] KEELC 2172 (KLR)

Karen Blixen Coffee Garden & Cottages Limited v Tamarind Management Limited [2017] KEELC 2172 (KLR)

Environment and Land Court
28 July 2017
3,903 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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A Kenyan court sent a landlord-tenant dispute back to arbitration, confirming that once one party starts arbitration, the other must participate.

What this practically means

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Executive summary

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This is a ruling by the Environment and Land Court at Nairobi (B M Eboso J) on a Notice of Motion dated 29/6/2016 filed by Tamarind Management Limited (the lessee) in ELC 679 of 2016, consolidated with ELC 517 of 2014 and ELC 519 of 2014, all arising from a sub-lease dated 3/12/2012 over four Karen parcels (LR 10126/2 to 10126/5). The lessee sought a stay of proceedings pending arbitration, referral of disputes to arbitration, and interim protective measures under Sections 6 and 7 of the Arbitration Act, the dispute being whether it remained entitled to renew the sub-lease under Clause 9. The lessor (Karen Blixen Coffee Garden & Cottages Limited) contended there was no arbitrable dispute because the renewal window had lapsed and breaches had occurred, and that arbitration under Clause 18.3 was optional. The court first held the ELC had jurisdiction as the pre-2010 High Court's successor under Section 33 of the Sixth Schedule to the Constitution. It found a live dispute within the broad wording of Clause 18.3, held that the responding party is bound once arbitration is initiated, found the applicant ready and willing to arbitrate with no impediment shown, and held the balance of convenience favoured maintaining the status quo. The court referred all disputes in the three suits to arbitration, stayed the court proceedings, directed maintenance of the status quo, and made no order as to costs.

Key legal issues

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01

Whether a dispute exists warranting reference to arbitration

Holding

The claims and disagreements in the three consolidated suits constitute disputes within Clause 18.3 of the sub-lease, including the question whether the lessee forfeited its entitlement to renewal.

Reasoning

The court examined the statements of claim in the three suits and observed that courts hear disputes, not undisputed matters. The lessor's own resort to court demonstrated disagreement between the parties on matters arising under the sub-lease. The parties had consensually defined arbitrable matters broadly as any dispute, claim, controversy or disagreement arising under or pursuant to the lease, so the lessor's claims for injunction and damages and the renewal dispute all fell within the arbitration clause.

p. 5
02

Whether the respondent is obliged to submit to arbitration initiated by the applicant

Holding

The word 'may' in Clause 18.3 grants a discretion only to the party electing arbitration; once arbitration is initiated, the responding party must submit to the tribunal.

Reasoning

Interpreting Clause 18.3, the court held that the permissive language gives either party the discretion to elect to submit a dispute to arbitration. That election, once exercised by initiating arbitration proceedings, binds the responding party to accept the reference and submit to the tribunal's jurisdiction; failure would constitute a default dealt with under the arbitration rules in the agreement.

p. 5
03

Whether court proceedings should be stayed pending arbitration

Holding

Stay was warranted: the applicant was ready and willing to arbitrate, no impediment to the arbitration agreement was shown, and parallel proceedings would defeat arbitration.

Reasoning

Applying the Court of Appeal criteria in Esmailji and Niazsons, the court found the applicant's annexures showed readiness and willingness to facilitate proper conduct of the arbitration, and the respondent adduced no evidence of any statutory or other impediment to the arbitration agreement's validity or operation. Allowing parallel court proceedings after referring matters to arbitration would defeat the purpose of arbitration.

p. 6
04

Whether interim protective measures under Section 7 should be granted

Holding

Maintenance of the existing status quo was ordered in support of arbitration, since failure to maintain it could render the tribunal's findings nugatory.

Reasoning

Applying the Safaricom v Oceanic Beach criteria, the court declined to delve into the merits, which belong to the arbitrator. Noting the sub-lease term had run or lapsed and that the renewal question was for the tribunal, the court held the balance of convenience favoured maintaining the existing status quo so the subject matter of the arbitration remains available if the lessee succeeds on renewal.

p. 7
05

Jurisdiction of the ELC over an application under Sections 6 and 7 of the Arbitration Act

Holding

The ELC has jurisdiction as the successor institution to the pre-2010 High Court in land matters.

Reasoning

The court noted, sua sponte, that Sections 6 and 7 of the Arbitration Act were enacted before the 2010 Constitution when the High Court was the contemplated forum. Under Article 165(5) the High Court is divested of jurisdiction over matters reserved for the ELC, and Section 33 of the Sixth Schedule makes the ELC the legal successor to the pre-2010 High Court in environment and land matters; the court was therefore satisfied it had jurisdiction.

p. 3

Legal principles established

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  • Once a party elects to initiate arbitration under a clause giving either party discretion to refer disputes to arbitration, the responding party is bound to submit to the arbitral tribunal's jurisdiction.
  • Under Section 6(1)(b) of the Arbitration Act, 'dispute' carries the broad meaning the parties contemplated in the arbitration agreement, and a disagreement on entitlement under a renewal clause is an arbitrable dispute.
  • The ELC is the legal successor to the pre-2010 High Court in land matters and has jurisdiction to entertain applications under Sections 6 and 7 of the Arbitration Act concerning land disputes.

Court orders

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  1. 1.All disputes, claims, controversies and disagreements in ELC Case Nos. 679 of 2016, 517 of 2014 and 519 of 2014 referred to arbitration within the framework of Clause 18.3 of the sub-lease dated 3/12/2012
  2. 2.Court proceedings in the three consolidated suits stayed pending determination through arbitration
  3. 3.Status quo presently prevailing between the parties to be maintained pending determination of the matters referred to arbitration
  4. 4.No order as to costs of the application

Authorities

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Legislation

  • Arbitration ActSection 6
  • Arbitration ActSection 7
  • Constitution of Kenya 2010Article 159
  • Constitution of Kenya 2010Article 2(5)
  • Constitution of Kenya 2010Article 2(6)
  • Constitution of Kenya 2010Article 165(5)
  • Constitution of Kenya 2010Section 33 of the Sixth Schedule
  • Environment & Land Court Act

Cases cited (4)

  • Nyutu Agrovet Ltd Vs Airtel Networks Limited
    (2015) eKLR
  • Esmailji Vs Mistry Shamji Lalji & Co
    (1980) eKLR
  • Niazsons (K) Ltd Vs China Road & Bridges Corporation (Kenya)
    (200) eKLR
  • Safaricom Limited Vs Oceanic Beach Hotel Limited & 2 Others
    (2010) eKLR
Jurisdiction invoked
Article 162(2) of the Constitution read with Section 33 of the Sixth Schedule to the Constitution (successor jurisdiction to the pre-2010 High Court over environment and land matters)

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, "Karen Blixen Coffee Garden & Cottages Limited v Tamarind Management Limited [2017] KEELC 2172 (KLR)", Case Analysis (2017). Nairobi ELC Case No. 679 of 2016 (Lead File), consolidated with ELC Nos. 517 of 2014 and 519 of 2014. Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2017/2172/eng@2017-07-28

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