Breakfast and Business Group Limited v Odyssey Capital Ltd & 7 others (Commercial Miscellaneous Application E824 of 2021) [2023] KEHC 18855 (KLR) (Commercial and Tax) (23 June 2023) (Ruling)
Neutral citation:
[2023] KEHC 18855 (KLR)
Republic of Kenya
Commercial Miscellaneous Application E824 of 2021
FG Mugambi, J
June 23, 2023
Between
Breakfast and Business Group Limited
Plaintiff
and
Odyssey Capital Ltd
1st Defendant
Oddyssey Capital
2nd Defendant
Peter Kimari Kihara
3rd Defendant
Adedaji Oluwaseum
4th Defendant
Akindele Akitoye Adeoye
5th Defendant
Ladkoo Girish Rao
6th Defendant
Maina Michael
7th Defendant
Muli Erick Kinyowe
8th Defendant
Ruling
Brief Facts
1.Before the court is a Chamber Summons application dated January 18, 2022 filed by the 1st, 7th and 8th defendants (the applicants). It is brought under Article 159(c) of the Constitution of Kenya 2010, section 6 of the Arbitration Act 1995 Rule 2 of the Arbitration rules 1997 and all other enabling provisions of the law.
2.The application seeks the following orders;
3.The application is premised on the grounds on the face of it, supported by the affidavit of Michael Maina dated January 18, 2022 and buttressed by the written submissions of the applicants which are dated April 12, 2022.
4.The dispute in the matter revolves around the shareholding of the 1st defendant in the plaintiff company, under a Shareholding Agreement. The applicants’ case is that by virtue of clause 18.1, there was no right to move the court before exhausting the dispute resolution mechanism. The applicants took issue with the plaintiff for doing so, having filed the Notice of Motion application dated November 8, 2021.
5.The plaintiff opposed the Chamber Summons application and filed the following grounds of opposition dated February 28, 2022;
6.Simultaneously with the grounds of opposition, the plaintiff filed a replying affidavit dated February 28, 2022 sworn by Livingstone Monzi. The plaintiff states that given the numerous restructuring exercises that have taken place and still continue to take place in the 1st defendant company, not all members of the company are privy to the Shareholding Agreement. As such, not all parties to the suit herein are bound by the arbitration clause. Due to the new membership in the company, the plaintiff states that it is compelled into a contractual agreement with a new party unknown to it.
7.The plaintiff further avers that in any case, the applicants ceded to the jurisdiction of this court by failing to follow the procedure laid out by section 6(1) of the Arbitration Act.
Analysis
8.I have carefully considered the instant application together with the parties’ rival submissions and authorities they have cited in support of their cases. To my mind, the only issue for determination here is whether this dispute should be before this court or before an alternative dispute resolution (ADR) forum.
9.The principles for stay of proceedings in circumstances of an arbitration clause are well known. I point out the case of Blue Limited vs Jaribu Credit Traders Limited Nairobi (Milimani) HCCS No 157 of 2008 because of the observation that I wish to make. In this case, the court stated as follows:
10.I have perused the Shareholder Agreement that has been presented by the parties. Although the same is undated, it is executed by Eric Kinyowe Muli (8th defendant), Michael Maina (7th defendant), Peter Kimari Kihara (3rd defendant), Breakfast and Business Group Limited (plaintiff) and Alpha Hotels and Suites Ltd as shareholders, with Odyssey Capital Limited (1st defendant). I note that the authenticity of the document is not challenged by any of the parties. Clause 18.1 of the agreement states in part as follows: -
11.It is clear that there is a dispute with respect to the shareholding in the 1st respondent company. What is also clear is that there is an additional dispute as to the interpretation and application of Clause 18.1 of the agreement.
12.The decision to bypass the judicial system in favour of alternative dispute resolution was voluntarily taken by the parties herein. With respect to the requirements under section 6(1) of the Arbitration Act, the applicants filed a Notice of Appointment on January 14, 2022 and promptly filed the present application on January 18, 2022. I am satisfied that the application was filed ‘at the earliest stage of the proceedings’ (see Eunice Soko Mlagui v Suresh Parmar & 4 others [2017] eKLR.) I do not agree that this amounted to acquiescing the shortchanging of the ADR clause in the agreement.
13.Having also found that the agreement is valid, the role of the court is to give effect to the intention of the parties and allow the ADR forum to determine the question on the application of the agreement to the parties, since it is a dispute that arises from the agreement. I believe I have said enough without getting into the merits of this ground, and would not wish to prejudice any finding in that regard.
Determination and orders
14.In the premises, this court finds merit in the application and it is allowed on the following terms;i.These Proceedings are hereby stayed pending referral of the dispute through the dispute resolution mechanism envisaged under clause 18 of the shareholder’s agreement.ii.In order to enforce the agreement of the parties to the letter, with respect to mediation and subsequently arbitration should mediation not be successful, the parties shall appear before the Hon Deputy Registrar for purposes of appointment of a mediator to hear the dispute.iii.Costs to the applicant.
DATED, SIGNED AND DELIVERED IN NAIROBI THIS 23 rd DAY OF JUNE 2023.F. MUGAMBIJUDGECourt Assistant: Ms. Lucy Wandiri.