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High CourtPartially AllowedNot stated in the judgment text provided· Not stated in the judgment text provided

Plaintiff (Surveyor) v 1st and 2nd Defendants - Application for Stay and Referral to Arbitration

High Court of Kenya
10 January 2025
3,000 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 sent only the disputed part of a Kshs.120 million fee claim to arbitration, ruling that simply refusing to pay an undisputed bill doesn't trigger arbitration.

What this practically means

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Executive summary

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The plaintiff, a survey firm, sued the 1st and 2nd Defendants claiming Kshs.120,000,000 as professional fees for survey work done in subdividing LR No. 8786 Athi River, Machakos County, under an agreement dated 5th July 2021 between the plaintiff, the 1st Defendant (as agent) and the 2nd Defendant. The 1st Defendant brought a Notice of Motion dated 15th May 2024 seeking a stay of the suit and referral of the dispute to the contractual dispute resolution mechanism: assessment by the 2nd Defendant's auditors under clause 3.5 and, failing resolution within 15 days, arbitration under clause 16. The plaintiff opposed, contending there was no genuine dispute capable of referral since the work done and fee due were not contested. The 2nd Defendant supported the application. Justice Francis Rayola Olel identified the sole issue as whether the suit should be referred to the arbitral tribunal. Applying Section 6 of the Arbitration Act and the line of authority including Niazsons (K) Ltd v China Road & Bridge Corporation and London and North Western Railway v Billington, the court held that mere refusal to pay an undisputed claim does not trigger an arbitration clause, but that the defendants' inaction in the face of the plaintiff's demand imputed a dispute over part or the entire claim. The application was found partially successful. The court ordered the 1st Defendant to forward the plaintiff's fee claim documents to the 2nd Defendant's auditors within 14 days for assessment under clause 3.5, with the auditors to engage both parties' representatives in line with Article 47 and Section 4(1) of the Fair Administrative Action Act. Any residual dispute after assessment is to be referred to arbitration under clause 16, with a stay of proceedings pending that arbitration. The matter was to be mentioned within 45 days, with costs of the application in the cause.

Key legal issues

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01

Whether a dispute exists capable of referral to the contractual dispute resolution mechanism

Holding

A dispute exists as to part of the professional fee claim, warranting referral of that part to the auditors' assessment and, if unresolved, to arbitration

Reasoning

The court found that the plaintiff's claim for Kshs.120,000,000 was not settled and the defendants' inaction imputed a dispute over part or the entire claim. However, it was not disputed that the plaintiff partially undertook the assignment and was not paid. The court therefore crafted a two-tier approach: assessment by the 2nd Defendant's auditors under clause 3.5, and referral of any residual dispute to arbitration under clause 16.

p. 5
02

Whether the entire claim should go to arbitration

Holding

No - only the partially disputed professional fee, after assessment by the auditors, should go to arbitration if the parties do not agree

Reasoning

The court held that referring the plaintiff to arbitration over what is not disputed would be unjust, prejudicial, and an abuse of the Oxygen rules. It relied on the principle that mere refusal to pay an undisputed claim does not trigger an arbitration clause, citing Niazsons (K) Ltd v China Road & Bridge Corporation and the House of Lords decision in London and North Western Railway v Billington.

p. 5
03

Compliance with fair administrative action standards before the auditors make their assessment

Holding

The 2nd Defendant's auditors must engage the plaintiff's and 1st Defendant's representatives before making their assessment

Reasoning

The court imported constitutional and statutory fair administrative action guarantees (Article 47, Article 50(1) and (2) of the Constitution and Section 4(1) of the Fair Administrative Action Act) into the contractual audit process, requiring the auditors to hear both parties' representatives before determining what is due.

p. 6

Legal principles established

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  • Under Section 6 of the Arbitration Act, a court shall stay proceedings and refer parties to arbitration unless the arbitration agreement is null, void, inoperative, incapable of being performed, or there is no dispute between the parties
  • Mere refusal or silence in the face of a claim does not constitute a dispute capable of being referred to arbitration; only a genuine difference warrants referral
  • Courts enforce contracts as signed by the parties and will not sanction unilateral variation of terms

Court orders

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  1. 1.The 1st Defendant to, within fourteen (14) days of the ruling, forward all the plaintiff's professional fee claim documents and supporting documents supplied by the plaintiff to the 2nd Defendant's Auditors for assessment
  2. 2.From the date of receipt of the documents, the 2nd Defendant's Auditors to have 15 days to resolve the stalemate in line with clause 3.5 as read together with clauses 16.1 and 16.2 of the contract agreement dated 5th July 2021
  3. 3.The 2nd Defendant's auditors to engage the plaintiff's and 1st Defendant's representatives, in line with Article 47, 50(1) and (2) of the Constitution and Section 4(1) of the Fair Administrative Action Act, before making their assessment of what is due
  4. 4.If after the auditors' assessment any dispute on the amounts payable still exists, what is still disputed to be referred to arbitration under clause 16 of the contract dated 5th July 2021, with a stay of proceedings of the suit pending arbitration of the disputed sums
  5. 5.The matter to be mentioned within the next 45 days for further directions
  6. 6.Each party at liberty to apply
  7. 7.Costs of the application to be in the cause
Jurisdiction invoked
Article 159 of the Constitution of Kenya; Section 6 of the Arbitration Act (Cap 49); Sections 1A, 1B, 3A of the Civil Procedure Act; Order 51(1) of the Civil Procedure Rules

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, "Plaintiff (Surveyor) v 1st and 2nd Defendants - Application for Stay and Referral to Arbitration", Case Analysis (2025). Not stated in the judgment text provided. Source: https://new.kenyalaw.org/akn/ke/judgment/kehc/

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