Case ID:177907

Patronics Services Ltd v EPCO Builders Ltd & another [2021] eKLR

Case Metadata

Case Number:

Civil Case 227 of 2017

Parties:

Patronics Services Ltd v EPCO Builders Ltd & Proctor & Allan (E.A) Ltd

Date Delivered:

14 Jun 2021

Case Class:

Civil

Court:

High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Case Action:

Ruling

Judge(s):

Margaret Waringa Muigai

Citation:

Patronics Services Ltd v EPCO Builders Ltd & another [2021] eKLR

Court Division:

Civil

County:

Nairobi

Disclaimer:

The information contained in the above segment is not part of the judicial opinion delivered by the Court. The metadata has been prepared by Kenya Law as a guide in understanding the subject of the judicial opinion. Kenya Law makes no warranties as to the comprehensiveness or accuracy of the information

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA-MILIMANI

COMMERCIAL & TAX DIVISION

HIGH COURT CIVIL CASE 227 OF 2017

PATRONICS SERVICES LTD............................................ PLAINTIFF

VERSUS

EPCO BUILDERS LTD..............................................1

ST

DEFENDANT

PROCTOR & ALLAN (E.A) LTD.............................2

ND

DEFENDANT

RULING

PRELIMINARY OBJECTION

PLEADINGS

1. The Plaintiff filed suit on 29

th

May 2017 against the Defendants for the claim which was/is based on the following facts;

By Sub- contract of 26

th

June 2014, supplemental to the main contract for building works between 1

st

& 2

nd

Defendants, the 1

st

Defendant subcontracted the Plaintiff to undertake electrical installation works on the Project.

The Contract provided that the procedure for originating and processing payment certificates was as in the Main Contract, the Architect would issue Interim Payment Certificate for completed works upon application by the Contractor and upon valuation by Project Quantity Surveyor.

On 1

st

April 2016 Interim Valuation Statement, No. 16 was issued by Project Quantity Surveyor and recommended 16

th

Interim Payment of Ksh33,663,414.05/-; of this amount Ksh14,808,916.59/- was apportioned to the Plaintiff.

On 17

th

October, 2016, the Project Quantity Surveyor, issued Further Interim Valuation Statement, No. 17 was issued by Project Quantity Surveyor and recommended 17

th

Interim Payment of Ksh 15,909,897.29/-; of this amount Ksh 13,240,417.54 was apportioned to the Plaintiff.

After several demands of payment by the Plaintiff to Defendants, the amounts due and owing remained outstanding.

2. In Response, 1

st

Defendant filed Grounds of Opposition and application of 21

st

July 2017 seeking the Plaintiff’s Plaint be struck off as it was incurably defective, null and

void abinitio.

3. The entire pleadings were in breach of

Clause 31 of the Agreement & Conditions of Sub Contract for Building Works.

The 1

st

Defendant filed Defence & Counterclaim on 21

st

March 2018.

4. The Plaintiff/Applicant filed application on 9

th

October 2019 seeking judgment on admission be entered by the court against the 1

st

Defendant for Ksh 28,049.334.13/= with interest and costs. The Plaintiff/Applicant referred to admission as expressed in the 1

st

Defendant’s letter of 23

rd

February 2017, Paragraphs 13 & 15 of 1

st

Defendant’s Defence & Counterclaim and in light of the fact 1

st

Defendant has no defence with regard to Certificates 16 & 17.

PRELIMINARY OBJECTION

5. The 2

nd

Defendant filed Preliminary Objection on 8

th

March 2021, on grounds,

a) This Court lacks jurisdiction to hear and determine the matter since the Plaintiff has commenced this suit without exhausting the relevant dispute resolution mechanisms.

b) The suit offends and contravenes

Clause 31.1 of the Agreement

between parties of 26

th

June 2014, which requires that any dispute between the parties be referred to Arbitration.

c)

Clause 31.1 of the Agreement

confirms the Arbitration Agreement between the Plaintiff and the 1

st

Respondent.

d) This suit is premature and not ready for litigation in Court.

6. The essence of a preliminary objection was defined by Law, JA and Sir Charles Newbold P. in

Mukisa Biscuits Manufacturing Co Ltd Vs West End Distributors (1969) EA 696

.

At page 700, Law, JA stated that:

“The first matter relates to the increasing practice of raising points which should in normal manner, quite improperly be by way of preliminary objection. A preliminary Objection is in the nature of what used to be demurrer. It raises a pure point of law which is argued on assumption that all facts pleaded by the other side are correct. It cannot be raised if any fact has to be ascertained or if what is sought is the exercise of judicial discretion.

…..

a preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court or a plea of limitation or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration.”

7. The Court record contains both online and physically, pleadings, proceedings, written submissions by the Plaintiff dated 11

th

May 2021 and 1

St

Defendant’s Submissions of 11

th

May 2021.

8. On 17

th

March 2021, the 2

nd

Defendant who raised the Preliminary Objection, Ms Nyaga held brief for Mr Nyachoti who came on record. The Court granted the 2nd Defendant’s Counsel opportunity to file Notice of Appointment, pleadings and Written Submissions, then the Preliminary Objection which ought to be heard first to proceed on 17

th

May 2021.

9. On 17

th

May 2021, the Respondents; Plaintiff & 1

st

Defendant highlighted submissions. The 2

nd

Defendant did not participate in Virtual Proceedings and did not file Submissions.

10. The Court sought from Deputy Registrar to contact the 2

nd

Defendant on whether they were intent on pursuing the already filed Preliminary Objection. On 11

th

June 2021, the Deputy Registrar informed the Court that the 2

nd

Defendant advocates now on record had not filed any pleadings and former advocates were no longer on record.

11. The Court record contains the Plaint filed by Plaintiff on 29

th

May 2017, 2

nd

Defendant’s Defense filed on 12

th

July 2017 which at paragraph 26 denied the Jurisdiction of the Court by virtue of Arbitration Clause in the Sub Contract and the suit herein was/is said to be premature. The 1

st

Defendant filed application on 21

st

July 2017 and sought the Plaint be struck off with Costs as the pleadings were/are in breach of the mandatory provisions of

Clause 31

of the Agreement and Conditions of Sub Contract for Building Works. The Plaintiff through Grounds of Opposition of 15

th

September 2017, challenged the 1

st

Defendant’s application as it was not in compliance with

Section 6(1) of Arbitration Act

and that there was no dispute. The 1

st

Defendant sought leave which the Court granted to amend the Preliminary objection to include stay of proceedings. Instead, on 15

th

March 2018, the 1

st

Defendant filed Defense & Counterclaim.

12. The Sub contract executed between the Plaintiff and 1

st

Defendant of 26

th

June 2014 at

Clause 31.1

provides;

“In any dispute, or difference shall arise between the Contractor and Sub Contractor, either during the progress or after the completion or abandonment of sub contract works, such dispute shall be notified in writing by either party to the other with a request to submit it to arbitration and to concur in the appointment of an Arbitrator within 30 days of the Notice.”

13. There is an arbitration clause binding the Plaintiff and 1

st

Defendant as to their choice of forum of dispute resolution. Is there a dispute to be determined before the Arbitral Tribunal? The dispute in Court is for hearing and determination is the Plaintiffs claim against both 1

st

and 2

nd

Defendants.

14. The suit herein is by Plaintiff against the 1

st

& 2

nd

Defendants over the same claim of Ksh 28,049,334.13/-, Whereas there is an executed contract between Plaintiff and 1

st

Defendant with an Arbitration clause, it cannot bind the 2

nd

Defendant as it is not privy to the Sub contract.

15. On the other hand, there is the Main Contract executed between the 1

st

& 2

nd

Defendant that prescribes Arbitration as dispute resolution mechanism under the Arbitration Clause. This Court was/is informed that the there are already existing arbitration proceedings between 1

st

Defendant & 2

nd

Defendant before Sole arbitrator Mr Walter Aggrey Odundo, FCIARB, where it is alleged that the Plaintiff’s claim is part of the 1

st

Defendant’s claim and there is real risk of 2 forums Arbitration and Court Proceedings arriving at dissimilar or even contradictory decisions.

16. This Court considered the submissions by Plaintiff and 1

st

Defendant and finds as follows;

a) There is an arbitration clause between the 1

st

Defendant and Plaintiff and the choice of forum is Arbitration.

b) The 1

st

Defendant vide letter of 23

rd

February 2017 expressly admits to owing the Plaintiff Ksh 28,049,334.13/-.

c) In the Defence & Cross-claim filed on 13

th

March 2018 without leave of Court and past the statutory timeline, at paragraphs 13 & 15 clearly and unequivocally admitted indebtedness to the Plaintiff Ksh 28,049,334.13/-.

d) By letter of 21

st

May 2019, the 1

st

Respondent through its advocate on record admitted in writing that it was engaged in ongoing arbitration proceedings with 2

nd

Respondent and the amount due to the Plaintiff was not disputed.

e) The 1

st

Defendant does not contest works carried out by the Plaintiff on site. The 2

nd

Defendant’s Architects certified works by Plaintiff and issued Interim Certificates 16 & 17 to confirm Plaintiff’s Performance.

17. In the circumstances and totality of confirmed agreed facts there is no dispute between the Plaintiff and 1

st

Defendant to pursue Arbitration.

In

Clearspan Construction (A) Limited vs East African Gas Co. Ltd [2008] eKLR

, Where Justice Sergon had this to say;

“It is well settled that a defendant cannot succeed to obtain a stay by replying on an arbitration clause unless there is a dispute. I am convinced that a refusal to pay an outstanding debt cannot by any stretch of imagination amount to a dispute.

In

UAP VS Michael John Beckett

it was held;

“In our view, it is within the province of the court, when dealing with an application for stay of proceedings under section 6 of the Arbitration Act, to undertake an evaluation of the merits or demerits of the dispute. In dealing with the application for stay of proceedings and the question whether there was a dispute for reference to arbitration, Mutungi J. was therefore within the ambit of section 6 (1)(b) to express himself on the merit or demerit of the dispute. Indeed, in dealing with a section 6 application, the court is enjoined to form an opinion on the merits or otherwise of the dispute.”

18. A Preliminary Objection is not the legal procedure to seek stay of proceedings under

Section 6 of Arbitration Act

for parties to pursue Arbitration.

19. The Court finds that as between the Plaintiff and 1

st

Defendant, they have their choice of forum as arbitration but there is no dispute to pursue arbitration on by virtue of the admission elicited by correspondence and pleadings on record as considered above.

20. The 2

nd

Defendant’s Preliminary Objection by the 2

nd

defendant presumably filed by their former advocates on record and did not pursue it to its logical conclusion is hereby dismissed with costs for the following reasons.

a) The Plaintiff’s claim against the 2

nd

Defendant remains unresolved as the parties did not execute any contract and did not provide for arbitration to resolve disputes between them. The dispute between the Plaintiff and 2

nd

Defendant is within this Court’s jurisdiction in the absence of a valid contract executed by both parties that provides for Arbitration.

b) The ongoing Arbitration proceedings between the 1

st

& 2

nd

defendant do not/cannot bind the Plaintiff. The Plaintiff cannot enforce their Arbitral Award or claim from the said award as the Plaintiff is not privy to the original contract that housed the Arbitration Clause that provided for Arbitration between the parties. Secondly, obviously the Plaintiff is not party to these Arbitration proceedings.

21. Conversely, the 2

nd

Defendant was/is not party to the contract between the Plaintiff and 1

st

Defendant.

22. The Plaintiff’s claim against the 2

nd

Defendant cannot be safely dealt with in these Arbitration proceedings.

Therefore, the Plaintiff’s suit/claim against the 2

nd

Defendant remains live to be canvassed in Court.

DISPOSITION

23. The Preliminary Objection by the 2

nd

Defendant dated on 8

th

March 2021 is dismissed with costs.

DELIVERED SIGNED & DATED IN OPEN COURT ON 14

TH

JUNE 2021. (VIRTUAL CONFERENCE)

M.W. MUIGAI

JUDGE

IN THE PRESENCE OF;

MS ODUOR H/B MR. NGUGI FOR PLAINTIFF

MR KAIRU FOR THE 1

ST

DEFENDANT

COURT ASSISTANT - TUPET