Republic of Kenya - in the Chief Magistrate`s Court at Malindi - Civil Case No. 406 of 2013

REPUBLIC OF KENYA

IN THE CHIEF MAGISTRATE`S COURT AT MALINDI

CIVIL  CASE NO. 406 OF 2013

JOHARI VILLAS MANAGEMENT LTD.................................................PLAINTIFF/RESPONDENT

=VERSUS=

MELVILLE LIMITED …............................ ...........................................DEFENDANT/APPLICANT

RULING

       Before me is an application dated 19.12.2013 filed by the defendant in which it seeks the following orders;-

1. That this Honourable court be pleased to stay further proceedings in this suit and refer the dispute to arbitration in terms of clause 5.5 of the lease dated 21.5.2013 filed  as No.5 of the Plaintiff's bundle of documents on 26.11.2013 and or in the alternative,
2. That this Honourable court be pleased to strike out the plaint dated 25.11.2013 with costs to the defendant.

The application is premised on the following general grounds;-

(i)        The suit is frivolous, scandalous and vexatious;

(ii)        The Plaint as filed is an abuse of the process of the court and  will embarrass a fair trial of this suit;

(iii)        This Honourable court has no jurisdiction at all in this matter as the dispute herein is under clause 5.5 of the lease dated 21.5.2013 governed by arbitration law wherein the decision of the Arbitration is final;

(iv)        The Plaintiff has sued the lessor which is not legally permissible under the stipulations and conditions of the lease         dated 21.5.2013 hence legally untenable.  

The application is further supported by the affidavit of Roberto Ciavolela, a director in the defendant company.

       The Plaintiff opposed the application by filing grounds of opposition dated 26.3.2014.  The Plaintiff opposed the application on the following grounds.  

(a)        That the application is misconceived, bad in law, incompetent, vexatious and is an abuse of the court process and must therefore be struck out,

 (b)         That the application is meant to deny the plaintiff          a fair hearing of its claim.

       The application was argued on 23.4.2014.  Mr Matata counsel for the defendant/applicant submitted that the plaintiff was the defendant's management company in charge of managing the defendant's properties.  Mr Matata further submitted that the defendant had no financial obligation towards the plaintiff as the lease agreement between them clearly indicated that the operating expenses or service charges were to be paid by the lessees and not the defendant who was the lessor.  It was further submitted on behalf of  the defendant/applicant that the lease agreement provided that any dispute between the parties was to be referred to the Arbitrator under the provisions of the Arbitration Act and that the decision of such Arbitrator would be final.  

       Counsel for the defendant therefore contended that this court had no jurisdiction to entertain the claim. Counsel for the defendant prayed that the proceedings herein be stayed pending an outcome from an Arbitrator or in the alternative , the suit be struck out.  

       Mr. Chacha Odera advocate, held brief for Mr.  Nyakoe for the Plaintiff/respondent.  Mr. Chacha Odera in opposing the application submitted that applications under section 6 of the Arbitration Act were unique and stand alone applications.  Counsel further submitted that a party could not apply for stay of proceedings on one hand and either substantively  or in the alternative apply for striking out of the plaint.  Counsel for the plaintiff contended that by applying to have the plaint struck out, the defendant had by its conduct waived its right  to Arbitration as it had taken a step beyond filing an appearance. The plaintiff relied on the authority of Kisumuwalla Oil Industries Ltd-v-Pan Asiatic Commodities PTE Ltd   and  Another(2) [1995-1998]1EA153.  The Plaintiff prayed that the application be dismissed and the defendant be ordered to file a statement of defence.

       I have carefully considered the application and given due regard to the parties' submissions and the law applicable.

Section 6 (1)  of the Arbitration Act (as amended by Act No.11 of 2009)  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-

(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 lease agreement in issue is dated 21.5.2013.  Clause 5.5. thereof stipulates as follows;

“All disputes and questions which shall arise between the parties hereto touching this lease or the construction or application thereof or any clause or thing herein contained or to the rights or liabilities of any party under this lease shall be referred to the decision of a single arbitrator to be appointed in accordance with the provisions of the arbitration Act or any Act or Acts  amending or replacing the same.  The decision of such Arbitration shall be final, conclusive and binding on the parties.”

       The Plaintiff's claim against the defendant is for the payment of Ksh.1,008,000/= being operational expenses on account of the lease agreement.  In my considered view, the claim falls within the matters agreed to be referred to arbitration as per clause 5.5 of the lease.  It is worth noting that the plaintiff did not dispute the fact that the matter was one which could be referred to arbitration as per the lease agreement.  The Plaintiff did not also allege that the arbitration agreement was null and void or inoperative or incapable of being performed.  It is therefore my finding that the lease agreement is valid and that there is a dispute with regard to the matters agreed to be referred to arbitration.

       The Plaintiff's main ground of opposition is that by applying to have the plaint herein struck out, the defendant has already taken a step in the proceedings and that by so doing,  he is deemed to have waived his right to arbitration.  Mr. Chacha  Odera counsel for the Plaintiff relied on the provisions of section 6 (1) of the Arbitration Act and the authority of Kisumuwalla Oil Industries Ltd-v-Pan Asiatic Commodities PTE Ltd  and   Another 2 [1995-1998] 1EA153.  With all due respect to counsel for the plaintiff, I beg to disagree.  Counsel seems not to be aware of the amendment that was made to section 6 (1) of the Arbitration Act by Act No. 11 of 2009.  The effect of the amendment was that the words ".. files any pleadings or takes any other steps in the proceedings..”,  were replaced by the words “.......otherwise acknowledges the claim against  which the stay of proceedings is sought…”