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ELCDismissedNot stated in judgment (ruled at Nakuru Environment and Land Court)· [2024] KEELC 5180 (KLR)

Shah v Chweya (Environment & Land Case E041 of 2023) [2024] KEELC 5180 (KLR)

Environment and Land Court
10 July 2024
MOM. A. Odeny
994 words in judgment
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The bottom line

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What this practically means

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Executive summary

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This ruling of the Environment and Land Court at Nakuru (M. A. Odeny, J) determined a Notice of Preliminary Objection dated 5th December 2023 raised by the Defendant, who argued that the contract founding the Plaintiff's suit contained an arbitration clause as the parties' preferred dispute resolution mechanism, so the court lacked jurisdiction and the suit should be referred to arbitration. The Defendant relied on the separability of arbitration clauses, citing Elite Earthmovers, Kenya Pipeline v Datalogix and Shamji. The Plaintiff, through Mr. Kisila, countered that the underlying agreement had already been declared null and void in Nakuru ELC No. 359 of 2013 after the court found the defendant had fraudulently obtained the suit property and sold it to the plaintiff; the arbitration clause therefore perished with the contract. The Plaintiff invoked Section 6(1) of the Arbitration Act, which excepts agreements that are null and void, inoperative or incapable of being performed, and relied on D Njogu & Company Advocates v National Bank of Kenya. Applying Oraro v Mbaja on the nature of preliminary objections and taking judicial notice of the earlier judgment, the court held it could not breathe life into an illegality by referring disputes under a void contract to arbitration. The preliminary objection was dismissed with costs to the Plaintiff, and the suit remains before the court.

Key legal issues

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Whether a suit founded on a contract containing an arbitration clause should be stayed and referred to arbitration where the underlying contract has been declared null and void

Holding

The preliminary objection lacks merit; the arbitration clause perished with the contract declared null and void, so the court retains jurisdiction

Reasoning

The court took judicial notice of the judgment in Nakuru ELC No. 359 of 2013 declaring the sale contract null and void because the defendant fraudulently obtained the suit property and sold it to the plaintiff. Section 6 of the Arbitration Act provides an exception where the arbitration agreement is null and void, inoperative or incapable of being performed. Since the main agreement was void for illegality, its arbitration clause could not be enforced, and the court cannot sanitize or breathe life into an illegality.

p. 3

Legal principles established

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  • Preliminary objections must deal only with points of law, not disputed facts requiring evidence
  • Under Section 6(1) of the Arbitration Act, a court shall not stay proceedings and refer parties to arbitration where the arbitration agreement is null and void, inoperative or incapable of being performed
  • A court will not enforce or refer to arbitration terms of an illegal contract declared null and void for violating statutory provisions

Court orders

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  1. 1.The Preliminary Objection dated 5th December 2023 is dismissed
  2. 2.Costs of the Preliminary Objection awarded to the Plaintiff

Authorities

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Legislation

  • Arbitration ActSection 6(1)
  • Law of Contract ActCap 23

Cases cited (5)

  • Elite Earthmovers Limited v Machakos County Government & another
    [2020] eKLR
  • Kenya Pipeline Company Limited v Datalogix Limited and another
    Nairobi HCCC No 490 of 2004 [2008] 2 EA 193
  • Shamji v Treasury Registrar Ministry of Finance
    [2002] 1 EA 173
  • D Njogu & Company Advocates v National Bank of Kenya Limited
    Nairobi Civil Appeal No 165 of 2007 [2016] eKLR
  • Oraro v Mbaja
    (2005) 1 KLR 141
Jurisdiction invoked
Section 6(1) of the Arbitration Act (No. 4 of 1995) - court's discretion on stay and referral to arbitration

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, "Shah v Chweya (Environment & Land Case E041 of 2023) [2024] KEELC 5180 (KLR)", Case Analysis (2024). Not stated in judgment (ruled at Nakuru Environment and Land Court). Source: https://new.kenyalaw.org/akn/ke/judgment/keelc/2024/5180/eng@2024-07-10

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