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ELCDismissed· [2022] KEELC 765 (KLR)

Antony O B Omoro v Lorine Adhiambo Otieno & 3 others [2022] KEELC 765 (KLR)

Environment and Land Court
16 March 2022
COChristine Ochieng
2,025 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenyan courts will refuse arbitration if you first file a defence instead of promptly asking for a stay under section 6(1) of the Arbitration Act.

What this practically means

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Executive summary

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This is a ruling of the Environment and Land Court at Machakos on the 2nd Defendant's Notice of Motion dated 7th September 2021, which sought striking out of the 1st Defendant's counterclaim or, in the alternative, a stay of proceedings pending reference of the dispute between the 1st and 2nd Defendants to arbitration under Clauses 10.1, 10.2 and 10.3 of a Sale Agreement dated 11th July 2018 over title number Mavoko Town Block 2/454. The 2nd Defendant argued the counterclaim breached the arbitration clause. The Plaintiff opposed, asserting ownership of the land and alleging the 2nd Defendant fraudulently stole and sold it. The 1st Defendant, the counterclaimant, argued the arbitration clause covered only interpretation, application and implementation of the agreement, not fraud, and that striking out pleadings is a draconian remedy. The court framed a single issue: whether the counterclaim should be struck out or the suit stayed pending arbitration. It held that the 2nd Defendant relinquished his right to arbitration by filing a Memorandum of Appearance and Defence contrary to section 6(1) of the Arbitration Act, which required him to promptly seek referral to arbitration. The court, associating itself with the Diocese of Marsabit and Addock Ingram decisions, further found the claim and counterclaim raise triable issues, including allegations of fraud, and that part of the claim (the Plaintiff's ownership) is not in dispute, making referral improper. The application was dismissed with costs to the Plaintiff and 1st Defendant.

Key legal issues

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01

Whether the counterclaim should be struck out for offending the arbitration clause

Holding

The application was unmerited; the counterclaim raises triable issues including allegations of fraud against the 2nd Defendant

Reasoning

The 2nd Defendant sold the suit land to the 1st Defendant but failed to furnish completion documents; the Plaintiff holds title and denies selling the land; both the Plaintiff and 1st Defendant allege fraud. These are triable issues that cannot be determined on an interlocutory application, and striking out pleadings is a draconian remedy to be issued sparingly.

p. 3
02

Whether the suit should be stayed pending arbitration

Holding

Stay refused; the 2nd Defendant waived the arbitration clause by filing a Memorandum of Appearance and Defence without seeking referral to arbitration as required by section 6(1) of the Arbitration Act

Reasoning

Section 6(1) of the Arbitration Act requires a party wishing to rely on an arbitration clause to enter appearance and apply for stay before taking any other step in the proceedings. Filing a defence is such a step and amounts to relinquishment of the right to arbitrate. Further, the fulcrum of the dispute is title to land and fraud, and part of the claim (the Plaintiff's ownership) is not in dispute.

p. 2

Legal principles established

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  • A party who files a defence instead of promptly applying for stay under section 6(1) of the Arbitration Act relinquishes his right to have the dispute referred to arbitration
  • It is improper to refer a matter to arbitration where a portion of the claim is not in dispute

Court orders

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  1. 1.The Notice of Motion application dated 7th September 2021 is dismissed
  2. 2.Costs of the application awarded to the Plaintiff and 1st Defendant

Authorities

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Legislation

  • Civil Procedure Actsections 1A, 1B, 3, 3A and 59
  • Civil Procedure RulesOrder 2 Rule 15(b), (c) and (d); Order 46; Order 51 Rule 1
  • Arbitration ActSection 6(1)
  • Constitution of KenyaArticles 159(2)(c) and 159(2)(d)

Cases cited (10)

  • MITS Electrical Company Limited V Mitsubishi Electric Corporation
    (2018) eKLR
  • Mapis Investment (K) Ltd –Vs- Kenya Railways Corporation
    (2006) eKLR
  • Patel Vs Singh
    [1987] eKLR
  • Kivanga Estates Limited V National Bank of Kenya
    (2017) eKLR
  • Addock Ingram East Africa Limited V Surgilinks Limited
    (2012) eKLR
  • Mt. Kenya University V Step Up Holding (K)
    (2018) eKLR
  • Eunice Soko Magui V Suresh Parmar & 4 Others
    (2017) eKLR
  • Gourmet Meats Producers & Importers Ltd V Paul Lainan Nkina
    (2021) eKLR
  • Diocese of Marsabit Registered Trustee V Technotrade Pavilion Ltd
    (2014) eKLR
  • Telcom Kenya Limited Vs Rapid Communications Limited
    (2015) eKLR
Jurisdiction invoked
Sections 1A, 1B, 3, 3A and 59 of the Civil Procedure Act; Order 2 Rule 15(b), (c) and (d), Order 46 and Order 51 Rule 1 of the Civil Procedure Rules

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, "Antony O B Omoro v Lorine Adhiambo Otieno & 3 others [2022] KEELC 765 (KLR)", Case Analysis (2022). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/765/eng@2022-03-16

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