Valere Business Sytems v Cementers Ltd (Commercial Claim E18906 of 2024) [2025] SCC 37 (KLR)

At the time of writing this ruling, the parties herein had not complied with the directions issued by this court on 28 th August 2025. Be that as it may, the substance of the Respondent/Applicant’s Preliminary Objection could be gleaned from the pleadings and the documents before this court; therefore, this court proceeded to write this ruling on the Respondent/Applicant’s Preliminary Objection. ANALYSIS AND DETERMINATION This court has duly considered the substance of the Respondent/Applicant’s Preliminary Objection. The only issue for determination is whether the instant Preliminary Objection is merited. The Respondent/Applicant’s Preliminary Objection is grounded on the ground that paragraph 25 of the Lease Agreement dated 26 February 2022 provided that any disputes arising under the said agreement were to be referred to Arbitration. On the face of it, the Respondent/Applicant’s Preliminary Objection appears to be very sound in law per the doctrine of exhaustion that was well explained by the Court of Appeal in Geoffrey Muthiga Kabiru & 2 others v Samuel Munga Henry & 1756 others [2015] eKLR as follows: ‘It is imperative that where a dispute resolution mechanism exists outside Courts, the same be exhausted before the jurisdiction of the Courts is invoked. Courts ought to be fora of last resort and not the first port of call the moment a storm brews…The exhaustion doctrine is a sound one and serves the purpose of ensuring that there is a postponement of judicial consideration of matters to ensure that a party is first of all diligent in the protection of his own interest within the mechanisms in place for resolution outside the Courts. The Ex Parte Applicants argue that this accords with Article 159 of the Kitale SCC Claim No. E173 of 2024 Page 2 of 6 Ruling

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Constitution which commands Courts to encourage alternative means of dispute resolution….’ Section 6(1) of the Arbitration Act sets out the procedure of seeking the referral of a dispute filed in court to Arbitration as follows: “ Stay of legal proceedings 1. 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— 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.” (Emphasis added) The above provision of law has been the subject of various judicial pronouncements. The Court of Appeal in Adrec Limited v Nation Media Group Limited [2017] KECA 106 (KLR) eloquently stated as follows regarding this issue:“ Consequently, in pursuance with Section 6(1) of the Arbitration Act, it was open to the respondent to apply “not later than the time when the respondent entered appearance or otherwise acknowledged the claim against which the stay of the suit was sought. The record shows clearly that the respondent merely filed a notice of appointment of advocates and proceeded to apply for stay of the suit. Once a defendant, in a suit founded on a contract containing an arbitral clause, enters appearance or causes a notice of appointment of advocates filed on its behalf and Kitale SCC Claim No. E173 of 2024 Page 3 of 6 Ruling

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prior thereto or contemporaneously with such of the notice of appointment or entering of appearance files an application for stay of proceedings, the court is statutorily obligated to stay the proceedings and to refer the parties to arbitration as provided in the arbitral clause in the Agreement unless the court makes such findings as are referred to in (a) and (b) of Section 6(1) of the Arbitration Act. It should be emphasized that the right to seek and obtain stay of proceedings under section 6(1) of the Arbitration Act is lost the moment a defence is filed in the proceedings. By dint of the defence, the party filing it subjects itself to jurisdiction of the court and cannot thereafter resile from that position.”(Emphasis added) Similarly, the Court of Appeal in National Irrigation Authority formerly the National Irrigation Board v Satom SA (Civil Appeal E933 of 2023) [2025] KECA 1472 (KLR) stated thus:This provision must be construed in tandem with the interpretation made in Charles Njogu Lofty as tightening the time when a stay application must be made. This is also in line with the aspiration that a party insisting on the implementation of an arbitration agreement must do so at the earliest opportunity so that arbitration can be commenced without delay. It yields one answer: a party seeking to stay court proceedings which is subject of an arbitration agreement shall, in addition to satisfying matters set out in 6(1)(a) and (b), file the stay application not later than when the party enters appearance, and where no appearance is entered, not later than when the party otherwise acknowledges a claim against which the stay of proceedings is sought. We do not agree with the position posited by NIA that, having filed an appearance, it could still properly mount the stay application simply because it had not filed a defence or taken any other step in the proceedings. Perhaps, for good measure, we need to add this. The phrase “otherwise acknowledges a claim against which Kitale SCC Claim No. E173 of 2024 Page 4 of 6 Ruling

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the stay of proceedings is sought” in the provision does not mean when the party concedes or admits the claim. It simply means when the party first formally signals to court, by other means than entering appearance, that it is aware that the claim has been filed before the court. Say by the party’s advocate filing a notice of appointment or the party or its advocate fling a notice protesting jurisdiction. In which event the stay application should be filed simultaneously with the notice of appointment or the protest notice, whichever the case. (Emphasis added) A reading of the authorities above shows that a party seeking to refer a matter to arbitration must make such an application at the earliest opportunity possible. Further, such an application can not be made by a party who has acknowledged a claim and taken steps in the proceedings. The application is also supposed to be filed simultaneously with the notice of appointment or the protest notice. In this matter, whereas the Respondent/Applicant gave notice of the instant Preliminary Objection in their Response to the Statement of Claim dated 07 th March 2025, the Respondent/Applicant never filed an application for stay or referring this matter to arbitration as contemplated under section 6 (1) of the Arbitration Act. Instead, the Respondent/Applicant acknowledged the claim herein and even took steps towards settling this matter. The foregoing shows that the Respondent/Applicant cannot, at this stage, having submitted to the jurisdiction of this court, purport to invoke the provisions of section 6 (1) of the Arbitration Act. DETERMINATION Kitale SCC Claim No. E173 of 2024 Page 5 of 6 Ruling

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The upshot of the foregoing is that the Respondent/Applicant’s Preliminary Objection is bereft of merit, hence the same suffers the fate of dismissal with no order as to costs. It is so ordered. READ, SIGNED and DELIVERED in open court at Bungoma this 18 th day of September 2025 T. O. OMONO ADJUDICATOR In the presence of: C/A: Mr. Rioba Kitale SCC Claim No. E173 of 2024 Page 6 of 6 Ruling

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