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ELCOther· [2023] KEELC 577 (KLR)

Holborn Properties Limited v Davani Group Limited (Environment & Land Case 8 of 2022) [2023] KEELC 577 (KLR)

Environment and Land Court
10 February 2023
3,422 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~14 min to read original · ~4 min brief

The bottom line

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The Environment and Land Court at Malindi stopped a hotel sale dispute from proceeding in court, ruling the parties must resolve it through the arbitration process in their agreement.

What this practically means

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Executive summary

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This ruling of the Environment and Land Court at Malindi (M.A. Odeny, J) determined a Notice of Motion dated 10th March 2022 by the Defendant/Applicant seeking striking out or dismissal of the Plaintiff's suit, premised on an arbitration clause in a sale agreement dated 30th May 2016 for Watamu Bay Hotel on parcels Chembe/Kibabamshe/279, 394, 396, 401, 425, 428, 637 and 638, and a Deed of Acknowledgment and Undertaking dated April 2020 acknowledging a balance of USD 925,000 payable by 31st July 2024. The Applicant argued the dispute fell within clause 19 of the agreement requiring arbitration, and alternatively that the ELC lacked jurisdiction over what was a commercial dispute. The Plaintiff responded that its director had authority to swear the replying affidavit, that the dispute fell outside the arbitration clause, and that the Applicant had not waived nothing by entering unconditional appearance, relying on Rawal v Mombasa Hardware. The court held the board resolution authorised the deponent and that its late filing would not have been fatal. On jurisdiction, it found the ELC properly seized since Article 162(2)(d) covers contracts granting enforceable interests in land; however, since the parties had consensually agreed on arbitration, Section 6(1) of the Arbitration Act obliged the court to give effect to that agreement. The Applicant invoked the clause at the earliest opportunity, before filing a defence, and had not waived the right to arbitrate; the balance was also not yet due, making the demand premature. The court declined to strike out the suit and instead stayed the proceedings pending referral to arbitration under clause 9 of the agreement, with each party bearing its own costs.

Key legal issues

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01

Authority to swear the replying affidavit

Holding

The board resolution of 9th February 2022 authorised Ms. Chacha; in any event failure to file a board resolution is not fatal and it may be filed any time before the suit is fixed for hearing.

Reasoning

The court noted the resolution was on record in the Plaintiff's list of documents, and relied on Leo Investments Ltd v Trident Insurance Co Ltd quoting Kimaru J that such a resolution may be filed at any time before the suit is fixed for hearing and its absence is not fatal to the suit. The objection was therefore a non-issue.

p. 5
02

Jurisdiction of the ELC over a suit founded on a sale agreement containing an arbitration clause

Holding

The ELC has jurisdiction because Article 162(2)(d) covers contracts and instruments granting enforceable interests in land; the arbitration clause does not oust that jurisdiction but warrants a stay pending referral to arbitration.

Reasoning

Article 162(2)(b) and Section 13 of the ELC Act confer jurisdiction over disputes relating to land, including contracts and instruments granting enforceable interests in land. The dispute concerns a contract over land and its enforceability, so the court is properly seized. However, where parties have agreed on arbitration and no illegality is alleged, Section 6(1) of the Arbitration Act obliges the court to give effect to that agreement; the Applicant invoked the clause at the earliest opportunity, before filing a defence, so no waiver occurred.

p. 6
03

Whether striking out of the suit is available

Holding

Rather than striking out the suit, the just course was to stay the proceedings pending arbitration.

Reasoning

Having found the parties bound by the arbitration clause, and the demand for payment premature because the balance was payable by 31st July 2024, the court held that parties cannot escape their chosen dispute resolution mechanism. The Applicant sought striking out, transfer or referral; the court exercised its discretion in favour of a stay pending arbitration, mirroring the approach in Burn Manufacturing.

p. 7

Legal principles established

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  • Where parties to a contract have agreed on arbitration as their dispute resolution forum, the court must give effect to that agreement and cannot rewrite the contract for the parties.
  • A party who takes the earliest opportunity, upon entry of appearance and without filing a defence, to invoke an arbitration clause does not waive the right to refer the dispute to arbitration.
  • Under the principle of separability, a claim that the main agreement is invalid does not invalidate the arbitration clause.

Court orders

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  1. 1.Stay of these proceedings pending referral, hearing and determination of the dispute through the structured dispute resolution mechanism envisaged under Clause 9 of the Agreement dated 30th May 2016
  2. 2.Each party to bear their own costs

Authorities

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Legislation

  • Constitution of Kenya, 2010Article 162(2), 162(3), 162(2)(b), 162(2)(d)
  • Environment and Land Court Act, No. 19 of 2011Section 13(1), 13(2)
  • Arbitration Act, 1995Section 6(1), Section 7(1)
  • Civil Procedure Act, Cap 21Section 5
  • Civil Procedure RulesOrder 21 [1]

Cases cited (15)

  • Co-operative Bank of Kenya Limited v Patrick Kangethe Njuguna & 5 Others
    [2017] eKLR
  • Charles Njogu Lofty v Bedouin Enterprises Ltd
    [2005] eKLR
  • Eunice Soko Mlagui v Suresh Parmar & Others
    [2017] eKLR
  • Burn Manufacturing USA LLC v Sage South Africa (PTY) Limited
    [2020] eKLR
  • National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another
    [2001] eKLR
  • Joseph Kipngetich Korir v Litein Tea Factory Limited & Another
    [2016] eKLR
  • Leo Investment Ltd v Trident Insurance Co. Ltd
  • Arthi Highway Developers Limited v West End Butchery Ltd & 6 Others
    [2016] eKLR
  • Rawal v Mombasa Hardware Ltd
    [1968] E.A 398
  • D.T Dobie & Company (Kenya) Limited v Joseph Mbaria Muchina & Another
    [1980] eKLR
  • Peter Muema Kahoro & Another v Benson Maina Githethuki
    [2006] HCCC
  • China Sichuan Corporation for International Techo-Economic Co-operative (Sietco) v Kigwe Complex Limited
    [2013] eKLR
  • Republic v Registrar General and 13 Others Misc. Application No. 67 of 2005
    [2005] eKLR
  • Kenya Airports Parking Services Ltd & Another v Municipal Council of Mombasa
    2010 eKLR
  • International Consultancy Company Ltd (suing by a Power of Attorney No. P/A 65175/1 of Apexvision Limited v Telkom Kenya & Another
    [2019] eKLR
Jurisdiction invoked
Article 162(2)(b) of the Constitution and Section 13 of the Environment and Land Court Act, No. 19 of 2011

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, "Holborn Properties Limited v Davani Group Limited (Environment & Land Case 8 of 2022) [2023] KEELC 577 (KLR)", Case Analysis (2023). . Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2023/577/eng@2023-02-10

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