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High CourtPartially AllowedCivil Case No 10 of 2020· [2020] KEHC 3018 (KLR)

Wibeso Ltd & Others v Tamarind Meadows Ltd & Others (suit number not stated in judgment)

High Court of Kenya
29 September 2020
3,926 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~16 min to read original · ~4 min brief

The bottom line

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Contractual arbitration clauses are binding; courts will enforce them even if the application is slightly late, provided the dispute is commercial.

What this practically means

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Executive summary

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The defendants/applicants, including Tamarind Meadows Ltd, moved the High Court at Machakos by notice of motion dated 7.7.2020 seeking to stay and discharge orders made on 17.6.2020 (including an order to deposit Kshs 67,121,796), to stay further proceedings and refer the dispute to arbitration under clause 21 of the sale agreements, or alternatively to strike out the suit, stay it pending related Court of Appeal and Machakos ELC proceedings, or transfer it to the ELC at Machakos. They argued the court lacked jurisdiction over land matters, that section 6 of the Arbitration Act mandated referral, that the suit was res judicata and sub judice, and that the ex-parte orders were obtained by non-disclosure. The plaintiffs, off-plan purchasers of town houses on LR 18469, countered that the claim was for breach of contract and refund of purchase consideration, that the arbitration application was filed late, and that the interim orders were validly served. The court framed three issues and held that clause 21 made arbitration obligatory; that the dispute, being one of failure of consideration rather than title to land, was a commercial dispute within the High Court's jurisdiction and outside the ELC; and that although the referral application was late, the court would excuse the delay in the interest of justice and under Article 159(2) of the Constitution, noting the plaintiffs had not disclosed the arbitration clause at the ex-parte stage. The application was allowed: all further proceedings and orders were stayed, the dispute referred to arbitration, the parties to agree on a single arbitrator within 30 days (failing which appointment by the Chairman of the Chartered Institute of Arbitrators Kenya Chapter), determination within 60 days, and costs to the defendants.

Key legal issues

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01

Whether the dispute was subject to a valid arbitration agreement (clause 21 of the sale agreements)

Holding

Yes; clause 21 covered disputes on interpretation, rights, obligations and implementation of the agreement, and the dispute over failure of consideration fell within it.

Reasoning

The court examined clause 21 of the sale agreements which required disputes to be referred to arbitration after failed amicable negotiation. It found the plaintiffs' claim was for breach of contract and refund of purchase consideration, not a claim to title to land, and both plaintiffs and the 1st defendant were parties to the agreements, so there was no bar to referral.

p. 5
02

Whether the defendants' late application under section 6 of the Arbitration Act barred referral to arbitration

Holding

The court excused the delay in the interest of justice and Article 159(2) of the Constitution and referred the dispute to arbitration.

Reasoning

The defendants applied late, contrary to section 6 of the Arbitration Act which requires an application not later than entry of appearance. The court nonetheless exercised discretion, citing Article 159(2) and the parties' agreement, and noted the plaintiffs had failed to disclose the arbitration clause at the ex-parte stage, so no prejudice would be suffered.

p. 5
03

Whether the suit was a land matter outside the High Court's jurisdiction

Holding

No; the claim was a commercial breach-of-contract dispute for refund of purchase consideration, not a claim to title to land.

Reasoning

The court distinguished between disputes as to title or use of land (ELC jurisdiction) and contractual claims. The plaint sought refund of purchase consideration for failure of consideration, making it a commercial dispute within the High Court's jurisdiction and outside the Environment and Land Court under Article 162(2)(b).

p. 5

Legal principles established

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  • Where parties have agreed by contract to refer disputes to arbitration, the court should refer the dispute to arbitration before the parties approach the courts, subject to section 6 of the Arbitration Act.

Court orders

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  1. 1.All further proceedings and orders in the suit stayed and the dispute referred to arbitration under Clause 21 of the sale/purchase agreements
  2. 2.Parties to agree on a single arbitrator within thirty (30) days, failing which the arbitrator to be appointed by the Chairman of the Chartered Institute of Arbitrators Kenya Chapter upon application of either party
  3. 3.The dispute to be determined by arbitration within sixty (60) days from the date of appointment of the arbitrator
  4. 4.Costs of the application awarded to the defendant/applicants

Authorities

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Legislation

  • Constitution of KenyaArticles 48, 50, 159(2)(c), 159(2)(d), 162(2)(b)
  • Civil Procedure ActSections 1A, 3A
  • Civil Procedure RulesOrder 40 Rules 4, 4(3), 7; Order 51 Rules 1-3, 15
  • Arbitration Act 1995Section 6(1)

Cases cited (17)

  • Republic v Karisa Chengo & 2 others
    [2017] eKLR

    Jurisdiction of courts over land matters

  • Directline Assurance Co. Ltd & 4 Others v Suninvest & 15 Others
    (2019) eKLR

    Section 6 of the Arbitration Act and referral to arbitration

  • Auni Bhaiji & 4 Others v Chief Magistrate, Milimani Law Courts & 2 Others
    [2017] eKLR

    Service of orders under Order 40 Rule 4(3)

  • Esther Wambia Mungai v Fredrick Mwai Mwihia
    (2017) eKLR

    Failure to serve exparte orders within 3 days

  • Omega Enterprises (Kenya) Ltd v Kenya Tourist Development Corporation & 2 Others
    (1998) eKLR

    Service of exparte orders

  • Macfoy v United Africa Co Ltd
    (1961) 3 All ER 1169

    Orders made without jurisdiction are of no effect

  • Uhuru Highway Development Limited & 3 Others v Central Bank of Kenya & 2 Others
    Nairobi Civil Appeal 126 of 1995

    Non-disclosure of material facts in ex-parte applications

  • Reliance Bank Ltd v Norlake Investments Ltd
    (2002) 1 EA 227

    Security for costs / deposit orders

  • Suzanne Achieng Butler & 4 Others v Redhill Heights Investments Ltd & Another
    (2016) eKLR

    Predominant purpose test for jurisdiction over contractual disputes

  • Lofty v Bedouin Enterprises Ltd
    EALR (2005) 2 EA

    Conditions for stay of proceedings under section 6(1) of the Arbitration Act

  • Republic v Registrar of Societies- Kenya & 2 Others ex parte Moses Kirima & 2 Others
    (2017) eKLR

    Doctrine of res judicata

  • Liu Ching Liang v Webwave Electric Manufacturing (K) Co Ltd & 2 Others
    (2016) eKLR

    Purpose of asset-preservation orders to prevent dissipation

  • Xtranet Communications Limited v Westlands Skye Development Limited
    [2019] eKLR

    Preservation of funds held by a Special Purpose Vehicle pending suit

  • Cott UK Ltd v Barber Ltd
    [1997] 3 All E.R. 540

    Courts should be slow to interfere with parties' choice of arbitration and normally grant a stay

  • Niazsons (K) Ltd v China Road & Bridge Corporation Kenya
    [2001] eKLR

    Three basic aspects a court considers on an application to refer a dispute to arbitration

  • Diocese of Marsabit Registered Trustees v Technotrade Pavilion Ltd
    (2014) eKLR

    Requirement of prompt application under section 6(1) is substantial, not a technicality

  • Yes Housing Co-operative Society Limited v Kenneth Onsare Maina
    [2020] eKLR

    Court's constitutional duty to enforce arbitration clauses and refer disputes to arbitration

Jurisdiction invoked
Original civil jurisdiction of the High Court; application brought under Articles 48 and 50 of the Constitution, sections 1A and 3A of the Civil Procedure Act, Order 40 Rules 4 and 7 and Order 51 Rules 1-3 and 15 of the Civil Procedure Rules and section 6 of the Arbitration Act

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (2)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Wibeso Ltd & Others v Tamarind Meadows Ltd & Others (suit number not stated in judgment)", Case Analysis (2020). Civil Case No 10 of 2020. Source: https://new.kenyalaw.org/akn/ke/judgment/kehc/2020/3018/eng@2020-09-29

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