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ELCPartially Allowed· [2020] KEELC 3666 (KLR)

Kimani Wa Nyoike v Chuna Housing Co-operative Society Ltd [2020] KEELC 3666 (KLR)

Environment and Land Court
31 January 2020
OAO.A. Angote
1,882 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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A Kenyan court appointed an arbitrator for a land payment dispute but refused to freeze the company's bank account, confirming courts won't grant harsh interim measures without evidence.

What this practically means

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Executive summary

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The Plaintiff sold 100 acres at Athi River to the Defendant in 2010 and later agreed, by a written Sale Agreement dated 29th January 2013, to sell a further 3.03 acres for an alternative access road for Kshs. 12,120,000, payable in two instalments. The Plaintiff performed his obligations but the Defendant refused to pay, contending that the provision of road access was the Plaintiff's statutory obligation and that by coming to court the Plaintiff waived the right to arbitration. By a Notice of Motion dated 21st January 2019, filed together with the Plaint and before the Defendant entered appearance, the Plaintiff sought appointment of Mwaniki Gachoka Advocate as arbitrator under the agreement's arbitration clause, plus an order freezing the Defendant's bank account pending arbitration. The court found that a genuine dispute over Kshs. 12,120,000 had arisen, that the parties had agreed to refer disputes to a mutually agreed arbitrator, and that the agreement contained no procedure for appointment. Relying on Russell on Arbitration and Indigo EPZ Limited, the court held that jurisdiction over the substantive dispute vests in the arbitrator and that the court retains only residual jurisdiction. It appointed the arbitrator proposed by the Plaintiff and stayed the suit. However, it refused to freeze the Defendant's bank account, finding no evidence of inability to pay and holding that closure of the account was not status quo protection under Section 7 of the Arbitration Act. The Application was partially allowed with costs to the Plaintiff.

Key legal issues

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01

Waiver of right to arbitrate by filing a Defence

Holding

The court did not accept the waiver argument; the Application was filed before the Defendant entered appearance or filed a Defence, and the Defendant gave no reason why the suggested arbitrator should not be appointed

Reasoning

The Defendant argued that filing a Defence waived the right to arbitrate. The court noted the Application was filed before appearance or Defence, that the Defendant never responded to the Plaintiff's proposals for appointment of an arbitrator, and that the agreement contained no appointment procedure. The court therefore appointed the arbitrator proposed by the Plaintiff.

p. 3
02

Interim measures of protection under Section 7 of the Arbitration Act

Holding

An order freezing the Defendant's bank account was refused because there was no evidence of inability to pay any award

Reasoning

The court acknowledged its power to grant interim measures of protection but found no evidence that the Defendant would be unable to pay whatever the Arbitrator awards. The account is used to run the Defendant's affairs, and freezing it would go beyond preserving the status quo contemplated by Section 7 of the Arbitration Act.

p. 3
03

Existence of an arbitrable dispute

Holding

A dispute over payment of Kshs. 12,120,000 under the Sale Agreement has arisen and must be referred to an arbitrator

Reasoning

The Agreement of 29th January 2013 is in writing, its execution is not denied, it provided for referral of disagreements to a mutually agreed arbitrator, and the Plaintiff performed his obligations. The Defendant declined to agree to an arbitrator, so the court exercised its power to appoint one.

p. 3

Legal principles established

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  • Where parties have agreed to refer disputes to arbitration, jurisdiction over the substantive disputes vests in the Arbitrator; courts retain only residual jurisdiction over peripheral matters
  • The court's jurisdiction to appoint an arbitrator depends on a failure of the contractual procedure and the absence of agreement on the steps to be taken

Court orders

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  1. 1.Mwaniki Gachoka Advocate, a Senior Partner in the firm of Mwaniki Gachoka Advocates, appointed as Arbitrator under the Arbitration Clause in the Sale Agreement of 29th January 2013
  2. 2.The suit is stayed pending hearing and resolution of the dispute by the appointed Arbitrator
  3. 3.The Defendant to pay the costs of the Application

Authorities

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Legislation

  • Arbitration ActSection 7

Cases cited (1)

  • Indigo EPZ Limited vs. Southern African Trade and Development Bank
    (2002) KLR, 810
Jurisdiction invoked
Arbitration Act, Section 7; inherent jurisdiction to appoint an arbitrator where the arbitration agreement provides no appointment procedure

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, "Kimani Wa Nyoike v Chuna Housing Co-operative Society Ltd [2020] KEELC 3666 (KLR)", Case Analysis (2020). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2020/3666/eng@2020-01-31

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