Alubala v Zhongiao Third Highway Engineering EA Company limited (Cause E895 of 2023) [2024] KEELRC 2072 (KLR)
The bottom line
#A Kenyan court refused to send a dispute to arbitration because the employer had already terminated the contract instead of using the arbitration clause it later wanted to rely on.
What this practically means
#Executive summary
#Key legal issues
#Whether the dispute should be referred to arbitration under the Service Level Agreement
The application for reference to arbitration was dismissed despite being unopposed, as the Respondent terminated the contract without invoking the arbitration clause and is estopped from relying on it
The arbitration clause required all disputes to be resolved by arbitration. A dispute arose in August 2023 but the Respondent opted to terminate the Claimant's employment instead of referring it to arbitration. Having acknowledged the suit and complied with court directions before changing course, the Respondent sought to have it both ways, which the court found inequitable and unconscionable. Further, the substantive provisions for reference to arbitration were not properly invoked.
Whether Section 6(1) of the Arbitration Act was applicable
Section 6(1) was inapplicable because the Applicant did not seek a stay of proceedings, which is the salient relief under that provision
The Chamber Summons cited Section 6(1) in its preamble but the substantive provision was not invoked elsewhere in the application. Applications for reference to arbitration under Section 6(1) are ordinarily accompanied by a prayer for stay of the suit, which was absent here. The Respondent had already acknowledged the suit and was complying with directions before abruptly changing course.
Whether the Claimant's suit should be struck out
The prayer for striking out was refused as no grounds under Order 2 Rule 15 of the Civil Procedure Rules, 2010 were demonstrated
The Respondent provided no justification for striking out and did not demonstrate the provision of Order 2 Rule 15 of the Civil Procedure Rules, 2010 under which it moved. The jurisdiction to strike out pleadings is exercised sparingly and as a last resort, being a draconian remedy. No grounds were made out to warrant its exercise in the Respondent's favour.
Legal principles established
#- A party who unilaterally terminates a contract containing an arbitration clause without first invoking it is estopped from relying on that clause once the other party files suit
- Where a party has entered appearance and complied with court directions, a reference to arbitration under Section 6(1) of the Arbitration Act must be sought with the salient relief of stay of proceedings
Court orders
#- 1.The Respondent's Chamber Summons dated 8th May, 2024 is dismissed
- 2.Costs shall abide the outcome of the suit
- Jurisdiction invoked
- Employment and Labour Relations Court first-instance jurisdiction; application brought under Article 159(2)(c) of the Constitution, Sections 6(1) and 7(1) of the Arbitration Act and Rule 3 of the Arbitration Rules, 2020
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Alubala v Zhongiao Third Highway Engineering EA Company limited (Cause E895 of 2023) [2024] KEELRC 2072 (KLR)", Case Analysis (2024). Cause No E895 of 2023. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/2072/eng@2024-07-31
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.