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ELCDismissedThika ELC Civil Case No. E110B of 2021 (formerly Nairobi HCCC No. E227 of 2021)· [2022] KEELC 3161 (KLR)

Njenga v Mbugua & another (Environment & Land Case 110 'B' of 2021) [2022] KEELC 3161 (KLR)

Environment and Land Court
20 July 2022
BEB M Eboso
1,458 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 ruled that parties who delay invoking an arbitration clause after being sued lose their right to have the dispute sent to arbitration.

What this practically means

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Executive summary

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The plaintiff sued the defendants claiming breach and dishonesty under a joint venture agreement of 12/2/2019 under which she transferred two parcels of land, Kiambaa/Ruaka 6495 and 6496, to the 2nd defendant for Kshs 40,000,000 payable by an initial Kshs 8,000,000 and sixteen monthly instalments. She sought rescission of the agreement and reversal of the register entries, or in the alternative specific performance. The defendants filed a preliminary objection dated 28/9/2021 contending that Clause 23(b) and (c) of the agreement ousted the court's jurisdiction in favour of arbitration, and that under Article 162(2)(b) of the Constitution and Section 13 of the Environment and Land Court Act the High Court lacked jurisdiction. The suit was transferred from the High Court to the Thika Environment and Land Court as ELC Case No. E110B of 2021. Before B M Eboso J, the second limb of the objection was not pursued, having been overtaken by the transfer. The court rejected the objection on two grounds: first, only the 2nd defendant was party to the arbitration agreement, the 1st defendant, though its director, not being bound by it, and the company is a legal person distinct from him; secondly, the defendants entered appearance on 27/9/2021 but filed the objection on 28/9/2021, thereby forfeiting their right under Section 6 of the Arbitration Act to invoke the arbitration agreement not later than the time of entering appearance. The notice of preliminary objection was rejected for lack of merit. The main suit remains pending.

Key legal issues

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Whether the arbitration clause in the joint venture agreement ousts the jurisdiction of the court

Holding

The preliminary objection fails because only one of the two defendants is bound by the arbitration agreement and the defendants did not invoke it timeously under Section 6 of the Arbitration Act.

Reasoning

The court found that the suit involved two defendants but only the 2nd defendant, a body corporate distinct from the 1st defendant, was party to the arbitration agreement; the 1st defendant could not be compelled to arbitrate. Further, the defendants entered appearance on 27/9/2021 and only filed the preliminary objection on 28/9/2021, thereby forfeiting the right to invoke the arbitration agreement under Section 6 of the Arbitration Act. Counsel's submissions on the second jurisdictional limb under Article 162(2)(b) were abandoned as overtaken by the High Court's transfer of the suit.

p. 3

Legal principles established

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  • A party who does not seek a stay of proceedings under Section 6 of the Arbitration Act not later than when entering appearance loses the right to invoke the arbitration agreement.
  • An arbitration agreement binds only parties to it; a non-party cannot be compelled to submit to arbitration.

Court orders

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  1. 1.The notice of preliminary objection dated 28/9/2021 is rejected for lack of merit

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 162(2)(b)
  • Environment and Land Court ActSection 13
  • Arbitration ActSections 6 and 10

Cases cited (4)

  • Euromec International Limited v Shandong Taikai Power Engineering Limited
    [2021] eKLR
  • Mukisa Biscuit Manufacturing Co. Ltd vs West End Distributors ltd
    (1969) EA 696
  • Niazsons (K) Ltd v China Road & Bridge Corporation Kenya
    [2001] eKLR
  • Mt. Kenya University v Step Up Holding (K) Ltd
    [2018] eKLR
Jurisdiction invoked
Article 162(2)(b) of the Constitution read with Section 13 of the Environment and Land Court Act (suit transferred from the High Court)

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, "Njenga v Mbugua & another (Environment & Land Case 110 'B' of 2021) [2022] KEELC 3161 (KLR)", Case Analysis (2022). Thika ELC Civil Case No. E110B of 2021 (formerly Nairobi HCCC No. E227 of 2021). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2022/3161/eng@2022-07-20

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