The High Court has denied Tatu City Sh109 million in arbitration costs that the company had been awarded in a feud with a contractor- Ongata Works Limited.
In a partial decision, Justice Alfred Mabeya upheld the Sh21 million arbitration award but declined the arbitration costs, for being unreasonable compared to the arbitration award.
“It is the public policy of Kenya that legal costs should be reasonable, should not be arbitrary, should be guided by reason and justice…. A charge of costs which is five-fold of an award in the view of this court, does not fall under the definition of reasonable. The costs of Sh109,479,853 is in the view of this court excessive, punitive, and unreasonable weighed against the award of Sh21,541,823.40. Accordingly, I find merit in the application, and the same is allowed. The arbitral award as to costs is hereby set aside with costs,” the judge ruled.
Tatu City and the construction company had entered into a contract to construct trunk roads on various properties. A dispute, however, arose forcing the parties to take up arbitration.
The matter was resolved by the International Court of Arbitration on March 27, 2024. It awarded Tatu City an arbitral award of Sh21 million plus interest and legal costs of $842152.72 (Sh109 million).
Aggrieved by the decision, Ongata Works went to the High Court to set it aside, and Tatu City filed a counterclaim to have the arbitration award recognised and enforced.
The construction company told the court that the arbitrator relied on the opinion of Tatu City’s expert to determine the special damages that should be awarded. The company added that under Kenyan law, special damages need to be proved, not just pleaded. It faulted the arbitrator for failing to determine whether Tatu City had proved that it had suffered any damages.
In defense, Tatu City the construction company had not proved that the costs awarded had been unreasonable or that the award was against public policy.
In rejecting the application to set aside the Sh21 million, Justice Mabeya said that the construction company had not proved that the arbitration tribunal had renounced its duty and merely relied on the expert witness.
He said, “The Court believes that what the Tribunal did was to rely on what it thought was the best evidence in the circumstances. Parties who choose arbitration as a mode of dispute resolution must be aware that the Tribunal becomes the master in matters of law and fact save where it goes outside the parameters of justice.”
However, regarding the Sh109 million arbitration cost, the court said that the costs are not supposed to interfere with access to justice.
The court noted that the costs were expected to cover the arbitration tribunal, the expert witness, and Tatu City’s legal costs. The court said that legal fees must be reasonable and sound and based on the nature of the claim.
