Gateway Marine Services Limited v Chester Insurance Brokers Limited & 1 other

4. The court herein gave directions for parties to file submissions. The Defendants in their submissions dated 26/11/2024 argued that it is a well-known principle of contract law that parties are bound by terms of their agreement. The Defendants submitted that the existence of a valid and enforceable arbitration clause ousts jurisdiction of this court. 5. The Defendants submitted that they have sought at the earliest to oust jurisdiction of this court by seeking stay of proceedings in compliance with provisions of Section 6 of the Arbitration Act. It was prayed that costs follow the event. 6. The Plaintiff in their submissions dated 17/12/2024 contended that the operative law is Section 6 (1) of the Arbitration Act and that from the provision, it is obvious that the court is bound to refer the matter to arbitration unless the arbitral agreement is null and void or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration. 7. The Plaintiff submitted that the Defendants failed to honour their part of the contract, therefore the cause of action is not within the scope of matters to be referred to arbitration. They prayed that the application is dismissed with costs. 8. The 1st Defendant also filed a Notice of Motion application dated 18/11/2024 under Section 1A, 3A & 63 (e) of the Civil Procedure Act, Order 1 Rule 10 (2), Order 1 Rule 23 and Order 51 Rule 1 of the Civil Procedure Rules. The 1st Defendant seeks to have its name struck out from this suit and any proceedings thereto and that costs of the suit and application herein be borne by the Plaintiff. 9. The application is premised on grounds on its face and the Supporting Affidavit of Yatin Shah that the Plaintiff filed a suit against the Defendants herein through the Plaint dated 12/07/2024. The 1st Defendant denied any legal basis for the Plaintiff’s claim of indemnity as no reasonable cause of action has been disclosed against it through the plaint. 10. That the claim herein is for breach of contract relating to policy agreements that were executed between the Plaintiff and the 2nd Defendant to which the 1st Defendant is not privy to. That the 1st Defendant is a stranger to the dispute herein and the suit cannot be maintained against the 1st Defendant due to misjoinder. That the Plaintiff should also be condemned to pay costs on the basis of wrongfully joining the 1st Defendant. 11. In reply, the Plaintiff filed a Replying Affidavit sworn on 23/0 2023 by Shazia Firoz, the General Manager, that the reason for enjoining the 1st Defendant to the pleadings was the fact that when the claim was lodged, payment of Kshs. 5,000,000 came from the 1st Defendant and not the 2nd Defendant as expected. That this caused the Plaintiff to believe that there was an overlap and/or the 1st Defendant was more involved in the claim. 12. That the dispute herein involves the two Defendants since the 1st Defendant was the broker/agent who procured the insurance between the Plaintiff and the 2nd Defendant. That separating the parties might cause difficulties in prosecuting the Plaintiff’s case as the 1st Defendant was involved in payment procedures of the 2nd Defendant. 13. The application was canvassed by way of written submissions. Both parties complied by filing their rival positions. The 1st Defendant submitted that the principle of privity of contract is to the effect that only parties to a contract can derive benefits thereof or be burned with its obligations. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/4263/eng@2026-02-26 2

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14. Further, it was submitted that in order for a cause of action to be sustained against the 1st Defendant, there ought to be a decree or judgment and there ought to be a contract of insurance between the Plaintiff and the and the 1st Defendant. 15. The Plaintiff filed submissions dated 24/05/2025 submitted that the 1st Defendant is not just a relevant party but very integral to explaining the break in the claim chain during the claim process. That this court does not have to determine liability at this stage but involvement of the 1st Defendant is too significant to exclude them at this stage. That the principles governing joinder are further fortified under Order 1 Rule 10(2) of the Civil Procedure Rules which grants the court discretion to add a party whose presence before the court may be necessary in order to enable the Court to effectively adjudicate on the matters at hand. 16. The Plaintiff submitted that the 1st Defendant was not a passive intermediary but directly effected the payment to the Plaintiff. That further, the amount paid (Kshs. 4,953,087.00) did not match the amount recorded in the discharge voucher (Kshs. 5,000,000.00), and to date, no satisfactory explanation has been tendered. The discrepancy raises serious concerns regarding the nature of the 1st Defendant’s role and obligations. 17. That Section 70 of the Insurance Act and the Insurance (Intermediaries) Regulations, 2020 provide that an insurance broker must operate strictly as an agent and in accordance with fiduciary and professional standards. Where a broker takes on responsibilities beyond those of an intermediary, it may give rise to legal liability. Analysis 18. 19. Having considered the Chamber Summons, the Notice of Motion, the respective Replying Affidavits and submissions thereto, the issues for determination are: a. Whether the dispute falls within the scope of the arbitration clause so as to warrant stay under Section 6(1) of the Arbitration Act b. Whether the 1st Defendant is improperly joined and whether the Plaint discloses a reasonable cause of action against them c. Who should bear costs On the first issue, Section 6(1) of the Arbitration Act provides as follows: ‘A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or otherwise acknowledges the claim against which the stay of proceedings is sought, stay the proceedings and refer the parties to arbitration unless it finds: - 20. a. that the arbitration agreement is null and void, inoperative or incapable of being performed; or b. that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.’ The provision is couched in mandatory terms. In Eunice Soko Mlangui v Suresh Parmar & 4 others [2017] KECA 736 (KLR), the court held: “ Section 6 of the Arbitration Act is a specific provision of a statute that provides for stay of proceedings and referral of a dispute to arbitration where parties to the dispute have entered into an arbitration agreement. The conditions under which the court can stay https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/4263/eng@2026-02-26 3

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proceedings and refer a dispute to arbitration are prescribed by section 6 and in our view, the purpose of that provision is to regulate and facilitate the realisation of the constitutional objective of promoting alternative dispute resolution. We do not therefore find anything in the provision that can be described as derogating or subverting the constitutional edict as regards alternative dispute resolution. The provisions, for example, of section 6 which require parties to make an application for referral of a dispute to arbitration at the earliest opportunity and before taking any other action, or those that require the court not to refer a dispute to arbitration if the arbitration agreement is null and void, or is incapable of being performed, or if there is no dispute capable of being referred to arbitration, cannot be described as inconsistent with the constitutional principle of promoting alternative dispute resolution because the court is also obliged to take into account the equally important constitutional principle that justice shall not be delayed, by for example sending to arbitration a non-existent dispute, or allowing a party who has otherwise elected to pursue proceedings in the court, to belatedly purport to opt for arbitration.” 21. Further, Section 10 of the Arbitration Act restricts court intervention except as provided in the Act. It is also trite that parties are bound by their contracts. In National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd & another [2001] KECA 362 (KLR), the Court of Appeal held that: “ A Court of law cannot re-write a contract between the parties. The parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.” 22. Clause 7 of the policy provides that disputes as to amounts payable shall be referred to arbitration. The Plaintiff argues that the dispute is not about ‘how much’ but about failure to pay anything at all. However, the pleadings reveal that partial payment was made. The Plaintiff challenges the adequacy of payment and alleges breach of indemnity obligations. 23. The Defendants raised the arbitration issue at the earliest opportunity. There is no allegation that the arbitration clause is null, void, or incapable of performance. The Plaintiff’s argument that no loss adjustment report was prepared is a matter going to merits, not jurisdiction. Arbitrators are competent to determine such disputes. This Court therefore finds that the dispute falls within the scope of Clause 7. 24. On the second issue, the court is empowered to strike out a party improperly joined or whose presence is not necessary for effective adjudication. Order 1 Rule 10(2) of the Civil Procedure Rules provides: “ The court may at any stage of the proceedings, either upon or without the application of either party, and on such terms as may appear to the court to be just, order that the name of any party improperly joined, whether as plaintiff or defendant, be struck out, and that the name of any person who ought to have been joined, whether as plaintiff or defendant, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all questions involved in the suit, be added." 25. The principle of privity of contract was emphasized by the Court of Appeal in Eastern Produce Kenya Limited v Rongai Workshop & Transporters Limited & another [2024] KECA 747 (KLR) where it was held that a contract cannot be enforced by or against a non-party. 26. It is not disputed that the insurance contracts were executed between the Plaintiff and the 2nd Defendant. The 1st Defendant is an insurance broker. The Plaintiff’s justification for joinder is that payment of Kshs. 5,000,000 emanated from the 1st Defendant, there was a discrepancy between the discharge voucher and the actual payment and the 1st Defendant participated in claims processing. https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/4263/eng@2026-02-26 4

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27. However, the law is clear that a broker acts as an agent. Unless it steps outside its intermediary role or undertakes independent obligations, it cannot be liable under a contract to which it is not a party. 28. There is no separate contract between the Plaintiff and the 1st Defendant. Mere transmission of payment does not create contractual liability. Even if discrepancies exist in payment amounts, the proper defendant in an indemnity claim remains the insurer unless distinct wrongdoing by the broker is pleaded. This court therefore finds that no reasonable cause of action has been disclosed against the 1st Defendant. 29. On costs, in respect to the Chamber summons dated 26/08/2024, each part to bear its own costs. In respect to the Notice of Motion dated 18/11/2024, there is no evidence that the Plaintiff sued the 1st Defendant out of malice or vexation. Determination 30. Accordingly, this court makes the following orders: a. The Chamber Summons application dated 26/08/2024 is allowed as prayed. b. The Notice of Motion dated 18/11/2024 is allowed. The 1st Defendant is hereby struck out from the proceedings. c. The Plaintiff and the 2nd Defendant (now Defendant) to subject themselves to the arbitration process in accordance with Clause 7 of the Insurance Policy. d. Each party to bear its own costs. DATED, SIGNED AND DELIVERED VIRTUALLY AT MOMBASA THIS 26TH DAY OF FEBRUARY, 2026 ……………………….. HON. F. WANGARI JUDGE OF THE HIGH COURT In the presence of: Ms. Nzamsa Advocate for the Plaintiff Ms, Sheth Advocate h/b for Winnie Bett Advocate for 1st Defendant Mr. Ochieng Advocate for the Defendants for 2nd Defendant Ms. Salwa, Court Assistant https://new.kenyalaw.org/akn/ke/judgment/kehc/2026/4263/eng@2026-02-26 5

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