Abira v Maxcure Hospitals Limited (Civil Appeal E187 of 2023) [2024] KEHC 2992 (KLR) (22 March 2024) (Judgment)
Neutral citation:
[2024] KEHC 2992 (KLR)
Republic of Kenya
Civil Appeal E187 of 2023
RE Aburili, J
March 22, 2024
Between
Nixon Omondi Abira
Appellant
and
Maxcure Hospitals Limited
Respondent
(An appeal arising out of the Ruling of the Honourable D.K. Mutai in the Senior Principal Magistrate’s Court at Winam delivered on the 7th November 2023 in Winam PMCC No. E130 of 2023)
Judgment
Introduction
1.The appellant herein Nixon Omondi Abira sued the respondent Maxcure Hospitals Limited for breach of a legal services retainer agreement dated 1st July 2022 alleging that the respondent had failed to pay the monthly retainer fees for 9 successive months and further that the respondent terminated the said agreement in lieu of notice as enshrined in the aforementioned agreement.
2.The respondent who was the defendant entered an appearance and filed a preliminary objection to the suit contending that the parties had an arbitration clause in the aforementioned agreement at clause 5 and that thus the trial court lacked jurisdiction to hear and determine the suit and ought to have referred the suit to an arbitrator/mediator.
3.The trial court heard the preliminary objection and upheld it, finding that it was divested of jurisdiction to hear and determine the suit on merit in light of the arbitration clause and proceeded to strike out the appellant’s suit with costs.
4.Aggrieved by the said decision, the appellant filed a memorandum of appeal dated 7th November 2023 raising the following grounds of appeal:a.The learned magistrate erred in law and in fact in arriving at his ruling of 7th November 2023 by relying on the wrong principles of law.b.The learned trial magistrate erred in law and in fact in failing to consider submissions and arguments of counsel for the appellant and in failing to consider and apply case laws cited which are precedents binding upon the court hence arrived at a wrong decision.c.The learned magistrate erred in law and in fact in striking out the suit with costs and he had no such powers under Section 6 of the Arbitration Act. There is nothing in Section 6 or the entire Arbitration Act that allowed him to do so. 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 arbitrating where parties to the dispute have entered into an arbitration agreement.
5.The appeal was canvassed by way of written submissions.
The Appellant’s Submissions
6.The appellant’s counsel submitted that Section 6 of the Arbitration Act does not allow stay of proceedings and referral of the matter to an arbitration after a party has entered appearance. It was further submitted that the arbitration clause and the Arbitration Act does not divest the Court of its jurisdiction to hear and determine disputes.
7.The appellant relied on the case of Nancy Mwangi T/A Worthlin Marketers v Airtel Networks (K) Ltd (Formerly Celtel Kenya Ltd) & 2 Others [2014] eKLR, where the Court stated at paragraph 30 that:
8.The appellant thus submitted that the Court was not divested of jurisdiction in the matter and that therefore, the trial Magistrate's ruling should be set aside and this Honourable Court direct that the primary suit be set down for hearing.
9.The respondent did not file any submissions.
Analysis and Determination
10.Having considered the grounds of appeal and the submissions by the appellant, the issue for determination is whether this appeal has merit. This being a first appeal, it is the duty of the Court to review the evidence adduced before the lower Court and satisfy itself that the decision was well-founded. In Selle & Another v Associated Motor Boat Co. Ltd & Others [1968] EA 123, this principle was enunciated thus:
11.Jurisdiction of the court is always the focal point that every court has to determine before it can begin to wade itself into settling disputes that arise between parties. Jurisdiction is so important that various statutes have been enacted with provisions espousing which court or quasi-judicial body or authority has which jurisdiction to hear and determine which matter. Jurisdiction is a creature of the statute and the Constitution. Jurisdiction cannot be vested by parties and neither can the court arrogate itself of jurisdiction that it does not possess.
12.The centrality and importance of Jurisdiction has been underscored in various decisions of the Court of Appeal, as well as the Supreme Court of Kenya. In the case of Phoenix of E.A. Assurance Company Limited v S. M. Thiga t/a Newspaper Service [2019] eKLR, the Court of Appeal stated as follows:
13.The Supreme Court of Kenya on its part pronounced itself as follows on the of jurisdiction in the case of Republic v Karisa Chengo & 2 others [2017] eKLR:
14.Earlier on, in the locus classicus case of Owners of the Motor Vessel “Lillian S" v Caltex Oil (Kenya) Ltd [1989] KLR 1, it was stated thus:
15.Applying the above principles to this appeal, it is not in dispute that the parties herein entered into a legal services retainer agreement dated 1st July 2022. Clause 5 of the said agreement provides for arbitration as the avenue of the first instance for dispute resolution. The appellant claims that the trial court ought not to have struck out his suit. He also asserts in submission that in any case, the respondent having entered appearance in the suit, the court could not stay the suit and or refer the dispute to arbitration. he argues further that the presence of a clause on arbitration does not divest or oust the jurisdiction of the court to hear and determine the suit. He relied on the case of Nancy Mwangi t/a Worthlin Marketers (supra)
16.I will deal with the question of whether, the respondent having entered an appearance in the court below, the trial court could stay the suit and refer it to arbitration.
17.Section 6(1) of the Arbitration Act provides that:
18.In Niazsons (K) Ltd v China Road & Bridge Corporation Kenya [2001] the Court of Appeal held that:
19.There is no doubt that there is a clause in the legal services agreement requiring parties to refer any dispute arising that thy cannot solve between themselves in good faith, to arbitration. The law requires that no other steps be taken by an applicant other than entry of appearance and filing of the application.
20.In the instant case, the respondent entered appearance and filed a preliminary objection on the grounds that the trial court lacked jurisdiction in light of the arbitration clause, to entertain any dispute arising between the parties. Accordingly, I find and hold that the preliminary objection was brought within the ambit of the law and at the right time and stage of the case.
21.The appellant has also not argued that the agreement to refer the matter to arbitration is null and void. That means the clause in the legal services retainer agreement is a valid one and a binding agreement between the parties on disputes arising from the legal services retainer agreement.
22.Courts have taken the position that they cannot purport to rewrite a contract between the parties and that parties are bound by the terms of their contract unless coercion, fraud or undue influence are pleaded. (See National Bank of Kenya v Pipelastic Samkolit (K) Ltd & another [2001] eKLR).
23.Further in Nyutu Agrovet Limited v Airtel Networks Ltd [2015] eKLR it was held:
24.I observe that no application had been made by the either of parties to the dispute and suit to stay the suit and refer the matter to arbitration. However, the learned trial magistrate observed that the suit was premature at that stage and that the court was divested of jurisdiction to hear and determine the dispute.
25.Section 10 of the Arbitration Act provides that:
26.This section must be read together with Section 6 of the Arbitration Act in order to provide unassailable perspective and context of the law on this matter. I shall reproduce Section 6 of the Act here for emphasis and it provides as follows:a.that the arbitration agreement is null and void, inoperative or incapable of being performed; orb.that there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.”
27.In the case of Lofty v Bedouin Enterprises Ltd – EALR (2005) 2 EA: the Court of Appeal was categorical that:
28.The rationale for the decision in the Lofty case is that an arbitration clause ought to be invoked when the Applicant enters appearance and not after the Applicant has taken any other step like filing of pleadings. The object of Section 6(1) is therefore to ensure that applications for stay of proceedings are made at the earliest stage of the proceedings.
29.On the foregoing, I must restate, however, that an arbitration clause does not necessarily take away a party’s right of action in court to enforce his claim. It is also true that an arbitration clause may be nothing more than a collateral term of the contract between the parties by which a tribunal for determining disputes is provided. See Maimuna Hassan Yusuf v Charity Mnyazi Mwarumba [2020] eKLR.
30.Article 159 (2) (d) of the Constitution enjoins courts to administer justice without undue regard to procedural technicalities. The same Article obligates courts to encourage alternative dispute resolution mechanisms under article 159 (2) (c) of the Constitution including arbitration.
31.As was correctly submitted by the appellant advocate and as was held in the case of Nancy Mwangi T/A Worthlin Marketers v Airtel Networks (K) Ltd (Formerly Celtel Kenya Ltd) & 2 Others ( supra), where the Court stated at paragraph 30 that:
32.Thus, the fact that an arbitration clause exists in an agreement or a contract does not necessarily oust the jurisdiction of the court from hearing and determining the suit, save that the court shall stay suit and refer the dispute for arbitration in compliance with section 6(1) of the Arbitration Act.
33.For the above reasons, I find that this appeal has merit. It is allowed to the extent that the order made on 7th November, 2023 striking out the appellant’s suit with costs is set aside and substituted with an order reinstating the suit and staying the said suit. I further order that the dispute shall be referred to arbitration for hearing and determination of the arbitration proceedings as per clause 5 of the legal services retainer agreement.
34.Each party to bear their own costs of this appeal.
35.This file is closed and the lower court file to be returned.
DATED, SIGNED AND DELIVERED AT KISUMU THIS 22ND DAY OF MARCH, 2024R.E. ABURILIJUDGEPage 14 of 14