The High Court has directed that a multi-million-shilling housing-related commercial dispute between Raisin Limited and Centum Development Kenya Ltd be referred to mediation, in line with the contract’s alternative dispute resolution (ADR) clause, even as it declined to strike out two high-profile Centum directors from the suit.
Justice Benjamin Njoroge, sitting at the Milimani Commercial Courts, ruled that the claim by Raisin Limited, seeking KSh 340 million in finder’s fees, should first be handled through mediation under the Strathmore Dispute Resolution Centre (SDRC) as per the contractual agreement between the parties.
“The parties had in their contracting stage contemplated that disputes could arise,” Justice Njoroge said in a strongly worded ruling.
“They envisaged a form of dispute resolution. They even went ahead to name the institution to handle the dispute. This Court’s answer is a resounding NO, it will not ignore this arrangement.”
The court emphasized that Clause 18.2 of the Finder’s Fee Agreement signed on June 17,2021 binds the Plaintiff and the 1st Defendant to resolve their dispute through good faith negotiations and, if necessary, mediation, before resorting to litigation.
In a separate blow to Centum’s top brass, the Court rejected two applications by Samuel Kariuki and James Mworia, the 4th and 5th Defendants, who sought to have their names struck out from the proceedings.
The two executives, who serve in senior positions within Centum Group, had argued they were not parties to the agreement and thus could not be held personally liable.
Mr. Kariuki, the former Managing Director of Centum Real Estate (2nd Defendant), and Mr. Mworia, Centum Group CEO (6th Defendant), cited the doctrine of privity of contract, claiming the corporate veil protected them from personal liability.
But the court declined to let them off the hook, for now.
“Striking out a party is a draconian remedy,” the judge warned.
“It should only be allowed in the clearest of cases.”
Citing DT Dobie & Co. (K) Ltd v Joseph Mbaria Muchina, the judge held that if a suit discloses even a mere semblance of a cause of action, the court must allow it to proceed to full trial, where the facts can be interrogated under cross-examination.
“There are allegations of breach of a non-circumvention clause that bound the employees, officers, and Directors. This is an issue of fact to be proved through evidence,” the court observed.
Raisin Limited has accused the 4th and 5th Defendants of playing a central role in allegedly bypassing or benefiting from the Finder’s Fee Agreement without honouring the obligations.
The Plaintiff maintains it intends to file an application to pierce the corporate veil, arguing that the two executives were closely involved in confidential dealings under the contract.
“The Plaintiff says these Defendants stood at such close nexus with the 1st and 2nd Defendants that they must answer to the claims in court,” Justice Njoroge noted.
Nonetheless, the court cautioned it had not received a formal application to lift the veil at this stage, and would not prematurely determine whether the two could be held personally liable.
The judge therefore allowed the application filed by Centum Development Kenya Ltd (1st Defendant) seeking referral to mediation, and stayed proceedings only between Raisin Limited and Centum Development Kenya Ltd for a period of 90 days.
“No party may commence any court proceedings or arbitration in relation to such dispute until they have attempted to settle by mediation, and that mediation has terminated,” the judge said, quoting Clause 18.2.
On the question of cost, Justice Njoroge declined to award any costs to either party, stating:
“Seeing that the matter is now proceeding for mediation, and for purposes of encouraging the parties to resolve their issues, the Court makes no award of costs to either side.”
Meanwhile, the case against the other Defendants, including Centum Real Estate Ltd, Centum Investment Company PLC, and the three individual directors, remains active, pending the outcome of mediation.
