When to make application under Section 6 of Arbitration Act

TM AM Construction Group (Africa) v. Attorney General HCCC (Milimani) No. 236 of 2001

High Court of Kenya (Milimani, Nairobi), Mbaluto J.

Date: 5^th June, 2001.

Authorities Referred to in the Ruling

1. Co-operative Insurance Co. v. Loice Wanjiru Wachira (Court of Appeal, Civil Appeal No. 151 of 1995)

2. London and North Western Joint Railway v. JH Billington Limited (1899) AC 79

3. Section 6(1) of the Arbitration Act 1995

4. Section 107 (1) and 109 of the Evidence Act

This is a leading case on applications under section 6(1) of the Arbitration Act 1995. The main issue here was what time an application for stay of proceedings for reference to arbitration can be made. The court held that an application must be made not later than the time when appearance is made otherwise the it will be incompetent and doomed to fail.

The court was making a ruling pursuant to an application by the Attorney-General, the defendant in the matter, under section 6(1) of the Arbitration Act 1995 and Rule 2 of the Arbitration Rules 1997 for orders that the suit be stayed and the dispute between the parties referred to arbitration. The application was opposed allegedly as being bad in law for contravening section 6(1) of the Arbitration Act. The Plaintiff opposition was grounded in the fact that the application was filed after defendant had entered appearance and that there was no dispute "between the parties which could be referred to arbitration."

The plaintiff in the case had instituted a suit against the Attorney General on 21^st January 2001. The learned AG entered appearance on the 15^th March 2001. The instant application was then made on the 25^th April 2001.

Even though the presiding judge found there was an arbitration clause providing for reference of disputes to arbitration, he upheld the Plaintiff's opposition dismissing the application with costs. On the question of time Justice Mbaluto found that the AG had not taken action in the matter within the times limited by law. Not only did the AG file and serve a memorandum of service late, but he also failed to file a defence within prescribed time prescribed under the Civil Procedure Rules. Indeed, the Plaintiff's advocates had lodged an application on 10.4.2001 for leave to apply for judgement against the AG for failure to file and serve the necessary defence in the prescribed time.

The learned judge cited Co-operative Insurance Co. v. Loice Wanjiru Wachira (Court of Appeal, Civil Appeal No. 151 of 1995) where the Court of Appeal stated:-

"In the present case the appellant did more than just enter an appearance it delivered a defence, which is of course a pleading. The appellant made no application for stay of proceedings. The appellant was a party to an arbitration agreement within the meaning of section 6 of the Act. Arbitration clauses such as the arbitration clause in this case are known as Scott v. Avery arbitration clauses named after a leading case decided by the House of Lords in 1856 in which their efficacy was considered and have long been accepted as valid. These clauses do more than provide that disputes shall be referred to arbitration. They also stipulate that the award of arbitration is to be a condition precedent to the enforcement of any rights under the contract so that a party has no cause of action in respect of a claim falling within an arbitration clause unless and until a favourable award has been obtained. … In the present case if the appellant wished to take the benefit of the clause it was obliged to apply for a stay after entering appearance and before delivery of any pleading. By filing a defence the appellant lost its right to rely on the clause."

Applying the foregoing decision of the Court Appeal, the learned judge found that the AG was obliged to apply for a stay 'not later than the time when he entered appearance'. The court thus held that the AG had lost the right to rely on the arbitration clause because if the AG was to rely on the same he was obliged to make and application under section 6 not later than when he entered appearance.

On the second ground as to lack of dispute for arbitration, it was argued for the plaintiff that the AG was in fact making an application under section 6 of the Arbitration Act as a delay tactic given that there was not in fact a dispute about the claim. It was submitted that the AG took long and did not do anything on the matter and thus was precluded under section 6 (1) (b) of the Arbitration Act.

Section 6(1) (b) of the Arbitration Act provides that the court shall stay the proceedings and refer the parties to arbitration, unless it finds:-

"(b) that there is not in fact any dispute between the parties with regard to matters agreed to be referred to arbitration"

The AG claimed that there was dispute between it and the respondent deserved to be referred arbitration. The respondent retorted that there was in fact no dispute between the parties with regard to matters agreed to be referred to arbitration. The court found that the AG had failed to tender any evidence showing that there was in fact any dispute between the parties. The learned judge interpreted this to imply that no basis had been established to show that a dispute in fact existed to justify staying the proceedings and referring the proceedings to arbitration.

On this second point Justice Mbaluto cited a passage from the old case of London and North Western Joint Railway v. JH Billington Limited (1899) AC 79 In that case, Lord Halsbury stated at page 81:-

"A condition precedent to the invocation of the arbitrator on whatever grounds is that a difference between the parties should have arisen and I think that must mean a difference of opinion before the action is launched either by plaint or by writ. Any contention that the parties could when they are sued for the price of the services raised for the first time the question whether or not the charges were reasonable and that therefore they have a right to go to an arbitrator seems to me to be absolutely untenable."

In the learned judge's view, the above statement correctly expressed the view held by the court in the present case that a party who is wholly unable to produce the minutest of evidence to support an allegation of a dispute in a contract of the magnitude evidenced in the matter had absolutely no right to come to court and seek a stay of proceedings and reference to arbitration allegedly because he for the first time alleges that there is a dispute between the parties.

In this finding the judge was relying of provisions of section 107 (1) and 109 of the Evidence Act dedicated to burden proof generally and proof of a particular fact respectively.

"107. (1) Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist."

109. The burden of proof as to any particular fact lies on the person who wishes the court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.

The learned judge found that the requirements of the above sections of the Evidence Act had not been met by the affidavit evidence availed by the applicant to prove that there was dispute. He took issue with the fact that the affidavit on record only made reference to a discussion relating to a dispute while not a single piece of evidence was tendered to show that a dispute in fact exists between the parties. The judge also concluded that there was no positive disposition in the affidavit as to existence of a dispute or any documents to support the dispositions.

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.

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COURT OKs FOREIGNER'S DENIAL OF WORK PERMIT

Republic v Minister for Home Affairs & 2 others ex parte Leonard
Sitamze [2008] eKLR

High Court at Nairobi, Justice J.G. Nyamu, April 18, 2008.

The High Court has declined to reverse the decision of the Principal
Immigration Officer to refuse to issue a work permit to a foreign
national.

Leonard Sitamze, a Cameroonian national, had filed an application in
the High Court seeking a judicial review of the decision of the
Minister for Home Affairs and the Principal Immigration Officer in
which his application for a Class "H" work permit was declined. A
Class H permit is one of several types of work permits which an
Immigration Officer may issue to a foreigner. The discretionary power
to issue the permits is given to the Immigration Officer by section 5
of the Immigration Act.

Sitamze had told the court that he had been running a successful
company in Kenya with the aid of his wife, Josphine, a citizen of
Kenya, and that he had been issued with both a trading license by and
a certificate of good conduct. He stated that the police had
wrongfully accused him of not being in possession of valid
immigration documents and subjected him to intimidation, harrassment
and inhuman treatment. Sitamze termed the decision of the Minister
and Immigration Officer as discriminatory and unjust and amounting to
a denial of his right to the quiet use and enjoyment of his property,
his right to found a family as enshrined in Article 5 of the
Declaration of the Human Rights of Individuals Who Are Not Nationals
of the Country on Which They Live and Article 6(2) of the
International Covenant on Economic, Social and Cultural Rights
(ICSR).

He asked the High Court to issue the special order of mandamus to
compel the Minister to issue him with a class "H" work permit and an
order of Prohibition to forbid the Commissioner of Police from
harassing him, arresting him or hindering his free movement in Kenya.


The Minister, the Commissioner of Police and the Principal
Immigration Officer, who were named as the respondents to the court
action, all opposed Sitamze's application. They relied mainly on the
argument that they had acted in accordance with the provisions of the
Immigration Act empowering the Minister to issue a permit to a
foreigner after all the conditions for the issuance had been
satisfied and to direct the removal from Kenya of any person whose
presence is found to be unlawful. A classified document was produced
to the Court on behalf of the state as part of the Immigration
Department's evidence that Sitamze's presence in Kenya posed a threat
to national security.

Judge J. Nyamu agreed that indeed, the Minister for Home Affairs is
authorized by law to issue work permits to foreigners and in that
regard, the Minister would the best person to decide whether a
foreigner who seeks a permit has met the requirements provided by
law. In the Judge's view, it would be wrong for the Court to
interfere with the decision made by the Minister unless it is shown
that the decision has been made in abuse of discretion or of a legal
duty. The same considerations applied to the actions and decisions
taken by the Kenya Police who had a legal mandate to maintain law and
order and to detect and prevent crime. "Work permits are not an
automatic entitlements and have to be issued in accordance with the
domestic law" the Judge further noted. "They could be refused on
reasonable grounds and in the national interest". In any case, the
Court was satisfied that even though the fundamental rights enshrined
in the Constitution of Kenya were to be enjoyed by both citizens and
foreigners, Sitamze had failed to establish that he had been
subjected to torture or inhuman punishment by the police.

The Court appreciated that under the ICSR, to which Kenya was a
party, the right to work is a fundamental right. Sitamze was entitled
to the right to work and to seek redress if the right was infringed.
Further, under the Declaration on The Human Rights of Individuals Who
Are Not Nationals of The Country in Which They Live, he was entitled
to the right to choose a spouse, to marry and to found a family.
However, as an alien, the same Declaration obliged him to observe the
domestic laws of the State in which he was present and to regard with
respect the customs and traditions of the people of that State.
Sitamze had failed to prove that he had been discriminated against or
that his right to found a family had been violated.

Justice Nyamu was satisfied that the State had adduced sufficient
evidence to demonstrate that Sitamze's presence was a threat to
national security and this was a valid reason to decline to issue him
with a work permit. It would be wrong, he further observed, to
discriminate against a foreigner where he has created legitimate
employment for himself and his family but where there are national
security concerns, the Minister would be entitled to decline to issue
a work permit or to renew an existing one. Such a decision would not
constitute a violation of the constitutional and international human
rights to work and to establish a family life. The foreigner would
have a choice to emigrate with his family to his country of origin.
In this case, however, the Court was satisfied that Sitamze had
failed to prove that his right to family had been breached and that
in any event, the national interest would prevail.

Ultimately, the Court found that there was no merit in Sitamze's
application and it was dismissed.

Download Case


Reported by Michael Murungi, Advocate
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Law maketh business for itself

The one great principle of English law [and incidentally law the world over] is to make business for itself.

-Charles Dickens-

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