Grounds for refusal of stay under s. 6 of Arbitration Act, 1995

Victoria Furniture Limited-v-African Heritage Limited & Another HCCC (Milimani) No. 904 of 2001.

 

High Court of Kenya at Milimani, Nairobi. Mbaluto, J.

Date: 30^th November, 2001.

 

Authorities cited in the Judgement

1. TM AM Construction Group (Africa) v. Attorney General HCCC (Milimani) No. 236 of 2001
2. Emden & Gills Building Contracts and Practice 7^th Edition, at page 363

Advocates on Record

Miss Muriu for Applicant (Third Party)

Mr. Rayani for the Respondent (Defendant)

 

This case involved third-party proceedings where the third-party sought a stay of 'all the proceedings' and reference of the same to arbitration under, inter alia, section 6 of the Arbitration Act, 1995. The applicant had been served with a Third Party Notice against which it entered a memorandum of appearance in the case on 10.8.2001. However, the instant application was not filed until 11.10.2001.

 

The counsel for the Respondent submitted that by reason of the applicant's failure to file the application not later than the time when it entered appearance, there was non-compliance with the requirements of Section 6(1) of the Arbitration Act, 1995 and consequently the application was doomed to fail.

 

The applicant's side argued that an application under section 6(1) of the Arbitration Act did not have to be filed contemporaneously with appearance but could be filed at any time before any other pleadings are filed or taken.

 

The court did not agree with the applicant. Rather, it held that the clear position was that if a party wishing to take advantage of an arbitration agreement under section 6(1) of the Arbitration Act was obliged to apply for a stay 'not later than the time when he

(a)   enters appearance; or

(b)   files any pleadings; or

(c)   takes any other steps in the proceedings.'

 

In the court's view, that meant that if a party took any of the three steps without at the same time applying for a stay of proceedings, the he automatically lost the right to subsequently make the application for stay. The court in so holding upheld the decision in TM AM Construction Group (Africa) v. Attorney General HCCC (Milimani) No. 236 of 2001.

 

The court reasoning was that if the section were to be interpreted to mean that a party could file an appearance or take the two other steps and then wait for some time before applying for stay of proceedings, the phrase 'not later than the time  he entered appearance or etc, etc' would be not only superfluous but also meaningless. In any case, the court found that in the instant case there was delay of more than 31 days after appearance had been made which situation in the court's view was not what was contemplated under Section 6 (1) of the Arbitration Act. The court found these reasons enough to disentitle the applicant from applying for stay of proceedings.

 

The application for stay was also opposed on ground that the suit would ultimately in any event have to be determined by the Court. The court upheld this point finding that apart from the Defendant and the applicant, there was another party involved, namely the Plaintiff. As such, whether or not either of the Defendant or applicant is liable (which was the issue to be decided by arbitration), the matter was wont to come back to court for final adjudication as between either of two and the Plaintiff. The process of arbitration could clearly only decide the issue of who, between the Defendant and the applicant was liable, but not the issue of liability to the defendant. As a result, the court concluded that there were several questions of law to be resolved in the case.

 

The Court proceeded to uphold as extant in matter the following grounds supplied in Emden & Gills Building Contracts and Practice 7^th Edition, at page 363 upon which a court may refuse to stay proceedings and refer a matter to arbitration:

 

1. where there are questions of law involved;
2. where there is multiplicity of proceedings and (it is necessary to avoid) inconsistent findings of facts;
3. where the arbitration is appropriate, (as was obviously the case in the matter) for only a part of the dispute.

 

For the above reason, the court concluded that a miscarriage of justice to parties was therefore concluded to be likely if the proceedings were stayed and the matter referred to arbitration. In any case, the court ruled that the question of arbitration did not arise in the first place as the applicant was disqualified by reason of non-compliance with section 6 (1) of the Arbitration Act, 1995 from applying for a stay or reference to arbitration.

 

In a word, the ratio of the court's ruling on the second point is that a stay may be refused where there are questions of law involved; where there is multiplicity of proceedings and (it is necessary to avoid) inconsistent findings of facts; and where the arbitration is appropriate, for only a part of the dispute e.g. in third party proceedings as was the case in the matter.