The Petitioner contends further that the Respondents have arbitrarily and without any compensation taken away the proprietary interest conferred to the Petitioner between the year and The Petitioner contends that the acquisition of goodwill itself was in any event discriminatory as the Respondent selectively chose which distributors were to pay the goodwill. This, according to the Petitioner, was unconstitutional.
The Petitioner then states that it could only be appropriated in the manner contemplated under Article 40 of the Constitution. In these respects, the Petitioner contends that the routes or areas the subject matter of the goodwill payments by the Petitioner could not be taken away unless equal payment for the value thereof was made and in the Respondents interfering with and taking away the routes or areas, there was action in a manner not contemplated by the Constitution which not only resulted in the Petitioner being arbitrarily deprived of its property but also in the Respondents unjustly enriching themselves.
Such conduct on the part of the Respondents has been dubbed arbitrary and extortionate. The prolix affidavit may be stated to be of the following effect. The Respondents contend that the court lacks jurisdiction to entertain, hear and determine the issues raised by the Petitioner, as the Petition was filed in violation of the dispute resolution procedure set out in the agreement between the Petitioner and the Respondents. The agreed dispute resolution mode according to the Respondents is mediation and arbitration.
The Respondents state that they are ready and willing to have any dispute between them resolved by an arbitrator pursuant to the agreement between the parties. Additionally, the Respondents also contend that the Petitioner was guilty of material non-disclosure when it first appeared before the court on 14 th June The Respondents further contend that the Petitioners cannot claim any refund of the goodwill paid as all the agreements under which the payments were made expressly provided that the amounts would be non-refundable.
The Respondents however admit that the non-refundable commitment fees paid by the Petitioner aggregated kshs. The Respondents further contend that the Petitioner did not acquire any exclusive rights to the routes or areas for which the Petitioner paid the goodwill amount.
In their respects, the Respondents refer to the agreements executed by the parties both in and The agreements were made on 1 st July and 13 th October Additionally, the Respondents contend that the Competitions Act prohibited any such arrangement which would have conferred exclusivity to the Petitioner. The exhibited correspondence reveals various exchanges on the draft agreements between the parties counsel as well as meetings between the parties.
As an example, the Respondents pointed to the latest agreement executed on or about 3 rd June The Respondents assert that this agreement was negotiated between September and May with the parties meeting and exchanging various correspondences. For completeness, the Respondents contend that the Petitioner does not service the twenty two 22 areas which are the subject of the claims in court and further that there are already six distributors serving these areas. The Interested Party is acknowledged as one of the distributors.
Besides, other distributors have also been serving the area under dispute but the Respondents will not for contractual confidentiality reasons disclose such other distributors. As a result the Respondents contend that any orders to be issued by the court would expose them to unnecessary legal disputes for breach of contract. The Respondents finally contend that the Petitioner has not met the threshold for the issuance of a conservatory order and further that, on any event, the balance of convenience tilts in favour of the conservatory orders not being granted and the interim orders being vacated.
The Interested Party contends that it has a genuine and valid distributorship agreement with the Respondents. The agreement it is contended by the Interested Party came into life in and that it was reviewed again in May for a period of three years. The Interested Party contends that its rights to also enjoy and use its property will be affected if the court grants orders in favour of the Petitioner.
Arguments in court Dr. Kamau Karori assisted by Ms. Tom Macharia. Kiplagat submitted that the Petitioner seeks to secure its proprietary rights which it acquired from the Respondents for valuable consideration. On the issue of jurisdiction, counsel submitted that the issues raised by the Petition were not arbitrable, as they were statutory and Constitutional rights being litigated over and which invited considerations of public policy.
Rawal []eKLR for the proposition that in all matters concerning the Bill of Rights the issue had to be originated from the High Court with rights of appeal to both the Court of Appeal and the Supreme Court.
Additionally, Dr. Kiplagat also drew inspiration from the Australian case of Metrocal Inc —v- Electronic Tracking Systems Pty Ltd [] NSWLR Comm for the proposition that disputes over statutory and constitutional rights could not be determined by private persons or arbitrators as such disputes were not arbitrable.
On the substantive issue as to whether the Petitioner was entitled to the conservatory orders sought, Dr Kiplagat submitted that the Petitioner had a prima facie case with a likelihood of success. Foremost counsel submitted that all contracts including private contracts had to adhere to constitutional values and principles and any contract inconsistent with the Constitution could be questioned.
For this proposition counsel referred the court to the case of Barkhuizen —v- Napier [] ZACC 5 where it was held that even private contracts ought to respect Constitutional values and principles.
Then looping in, the Petitioner submitted that there was no justice if the Respondents could for valuable consideration transfer property to the Petitioner only to turn around and re-posses or acquire the same without any recompense to the Petitioner.
Additionally, counsel submitted that its rights to property had been violated. Kiplagat summed up his submissions by stating that the Petitioners right to property had been arbitrarily violated. The property in question was both the goodwill acquired or in the alternative the right to restitution which was not being honoured.
While insisting that the routes or areas given to the Petitioner in and were exclusive and that it would be absurd to pay for the areas or territories only for the Respondents to take them back. Kiplagat submitted that the evidence is inadmissible and unreliable as it is not owned by any author.
Kamau Karori, advocating for the Respondents, firstly focused on the provisions of the Arbitration Act Cap The main plank of objection to the application by the Respondents was that the court had no jurisdiction to adjudicate over the matter.
Mr Kamau Karori, firstly, submitted that where there was an arbitration agreement, then the court had no alternative but to stay all proceedings pending the arbitration. Counsel asserted that stay could only be denied where the arbitration agreement was null and void or incapable of performance and secondly, where there was no dispute with regard to the matters to be referred to arbitration. Mr Kamau Karori made a copious reference to Section 6 of the Arbitration Act in this regard and added that in the instant case there was an arbitration agreement and the dispute fell within the matters to be referred to arbitration.
Counsel, additionally, submitted that the proprietary right of goodwill in perpetuity claimed by the Petitioner did not exist and that in any event it was an arbitrable matter. On the merits, Mr.
Kamau Karori submitted that the Petitioner had failed to establish that it was entitled exclusively to the distribution routes or areas claimed. Further while not denying the payment of the goodwill or commitment fees of Kshs. According to Mr. Karori, claims for restitution or refund were arbitrable.
In Mr. In a quick sum up, counsel stated that this was a purely commercial issue and it was important to exercise the doctrine of constitutional avoidance and refuse to assume jurisdiction. The Respondents also referred to the case of Nyutu Agrovet Ltd —v- Airtel Networks Ltd []eKLR for the proposition that where parties have agreed to take the path of arbitration then the court pursuant to the provisions of Article should be supportive of such a choice and refer parties to arbitration whilst staying any proceedings commenced in court.
Further counsel submitted that the orders sought by the Petitioner offended Section 21 of the Competitions Act which prohibits restrictive trade practices. Counsel noted that the Petitioner on seeking exclusivity was infringing on the rights of others. Karori then submitted that the Petitioner was not seeking to maintain status quo but rather to have new contracts drawn by the court in so far as the Petitioner sought to include other areas additional to the ones allotted to the Petitioner vide a distributorship executed on 5 th June Additionally, the Respondent stated that other distributors had been appointed to the areas and that in any event the Respondents were willing to provide a guarantee for any sums claimed by the Petitioner.
For completeness and referring to the case of Gatirau Peter Munya vs. Counsel also urged that the application be rejected as it would not be in the public interest. Accordingly, counsel urged the court to decline jurisdiction and stay the proceedings in this Petition or in the alternative dismiss the application for want of merit.
Tom Macharia submitted on behalf of the Interested Party that the monopoly sought by the Petitioner to distribute the Respondents products was not and could not be a constitutional right.
Counsel noted that the Competitions Act prohibits monopolies. Referring to the case of Mapis Investments Ltd —vs- Kenya Railways Ltd []eKLR, counsel then submitted that the property claimed by the Petitioners had been unlawfully and illegally acquired, if at all, as exclusivity was prohibited and outlawed by statute.
Finally, Mr. Macharia stated that the Petitioner was simply seeking to vary a written agreement through the use of parole evidence and this was contrary to well known principles of law as laid out in the case of Kenya Corporation Finance Company —v- Kipngeno Arap Ngeny []eKLR. Macharia wound up his submissions by stating that the orders sought if granted would be disproportionate and further that no goodwill had been paid to the 2 nd Respondent with whom the Interested Party also had a contract for the distribution of beer.
For completeness, Mr. Macharia also stated that it would be contrary to public policy to grant the orders sought by the Petitioner. He however reiterated his earlier submission that private individuals could not. Kiplagat also stated that the routes claimed had always been served by the Petitioner until June and that in any event the routes assertions had not been controverted at all save for a denial from the bar.
Discussion and Determination I have considered the pleadings filed and the submissions by the parties. At this stage of the proceedings two core issues arise for determination. Firstly is whether the court has jurisdiction to entertain the instant Petition. Secondly, is whether the Petitioner is entitled to the conservatory orders sought. Application No. The Respondents pointed to various arbitration clauses contained in the agreements between the Petitioner or its predecessor in title Bia Yetu Agencies Ltd on the one hand and the Respondents on the other hand.
The Respondents then pointed to Section 6 of the Arbitration Act and urged that the proceedings be stayed and the parties referred to arbitration, which the Respondents stated they were willing to attend to. The Respondents then added that the dispute herein was a purely commercial matter best left to be adjudicated before a commercial dispute forum rather than as raising constitutional issues.
The Petitioners brief in regard to issue of jurisdiction was that the issues raised by the Petition are not arbitrable and also are outside of the ambit of the arbitration agreement as they involve public policy issues. There is certainly no doubt that the Courts jurisdiction is conferred by the law.
The Respondents on the other hand deny so acting and state that there is an agreement between the two parties and if the Petitioner views it that there has been a breach then pursuant to the same agreement, the dispute must be referred to arbitration and not the court. The Respondent additionally states that Article of the Constitution which itself advocates arbitration must be promoted by giving force to Section 6 of the Arbitration Act.
I have previously been confronted by a similar issue where a party seeks to horizontally enforce constitutional provisions and another party states that for want of jurisdiction and by virtue of an arbitration agreement the remit of the court is limited to simply staying the court proceedings. Other courts of equal or superior hierarchy have also confronted the same question.
Though there has already been much debate on the issue, there has been no unison on the point. One in favour of the court exercising jurisdiction even in the light of a private personal relationships where parties had settled on a private dispute resolution forum and another urging reticence in such cases. In Lipisha Consortium Ltd Supra it was stated as follows: [52]Evidently, the two schools of thought are loudly asymmetrical. The court should not be in a hurry to simply invoke the principle of pacta sunt servanda the agreement must be kept and dispatch the parties away from the court process.
The court ought to be holistic enough in considering the private personal agreements together with Article on the one hand and the extent of Article on the other hand. Painlessly, the court must seek to find out especially where one party alleges so, whether the dispute genuinely concerns violations of the Constitution.
By recognizing the Constitution to be supreme, the Kenyan people could not have intended to again leave alone matters done by parties to the parties themselves but rather appeared under Article to empower the court with the task to define limits of any rights whether entrenched under the Bill of Rights or by common law, modifying the latter where necessary to attain an appropriate blend with Constitutionalism.
It is little wonder that Article 2 4 of the Constitution states as follows: 4 Any law including customary law, that is inconsistent with this Constitution is void to the extent of the inconsistency, and any act or omission in contravention of this Constitution is invalid.
The Respondents say it is, the Petitioner says nay. The Constitution itself has not offered any exceptions to matters to be resolved by way of alternative dispute resolution and I am not particularly prepared to adopt the reasoning in Metrocall Inc —v- Electronic Tracking Systems Pty Ltd Supra that private arbitrators may not arbitrate over Constitutional and Statutory rights. Where however a dispute or claim is laid out as a constitutional issue then the High Court must deal with the dispute.
It all depends on how the issue is laid before the court. Secondly, and still on the issue of arbitrability, there does exist the jurisprudential doctrine of kompetenz — kompentenz in arbitration.
Under the principle, it is for the arbitral forum to determine, whether it has jurisdiction. Jurisdiction of an arbitral forum includes the arbitrability of any issue or dispute before it. If the dispute is referred to arbitration, the arbitrator s will have the competence to determine whether the dispute or any issue is arbitrable.
Rather the court is only to intervene when the arbitral tribunal assumes jurisdiction when it does not have the same: see Section 17 as read together with Section 35 2 a iv and Section 35 5 i of the Arbitration Act Cap I would consequently find it inappropriate to decline to refer a matter to arbitration simply because a party states that an issue is not arbitrable even in the face of a binding and valid arbitration agreement as it should not be the court to decide who decides what in arbitration.
Even as I appreciate that there are the two schools of thought as to when the court entertains horizontal enforcement of the Bill of rights even in the face of an arbitration agreement , I am further cognizant of the principle that not every question in dispute raises a constitutional issue. In the instant case, the Petitioners case is, as I understand it as follows. The Petitioner having purchased goodwill from the Respondents acquired the same absolutely.
That it became a proprietary interest which the Respondent could not arbitrarily take back. If they had to take the proprietary interest back then the Petitioner was entitled to compensation either in the form of refund or in the form of payment of the same goodwill in its current value. The Petitioner states that any such approach of divesting the Petitioner of its property the goodwill would be unconstitutional as a violation of the Petitioners rights under Article 40 of the Constitution.
The Petitioner is firm that they do not contest the agreements entered into with the Respondents but rather that some of the terms of the contract appear unconstitutional. My view is that the Petition as drawn reveals that there did and do exist commercial agreements between the parties. For stated consideration certain proprietary rights are alleged to have been acquired and the same rights are also alleged to be taken away. Relevant Articles of the Constitution have been identified and stated.
That is the core question in this Petition and it is a purely a question of constitutional interpretation and determination, in my view. This court has the requisite remit in my view. It would also not be appropriate to dispatch the parties to arbitration for one more reason.
There are third parties now already impleaded and enjoined to these proceedings who were not and still are not parties to the arbitration agreement.
The Interested Party has joined the fray and so too are the 3 rd and 4 th Respondents. How would their interest if at all be covered through arbitration? Arbitration principles discourage involving parties who are not part of the arbitration agreement to arbitral proceedings or even the ultimate Award. I however do not for a moment view it that the framers of our Constitution intended the rights and obligations defined in our common law, in this regard, the right to freedom of contract, to be the only ones to continue to govern interpersonal relationships.
Conservatory order I now come to the second core question in the application. Even assuming that I was wrong on the issue of jurisdiction, would the Petitioner still have been entitled to ask the court for interim conservatory orders, a stay of proceedings notwithstanding? The list of possible reliefs run some five items.
The list is however not exhaustive. An interim measure of protection may thus very well be the equivalent of a conservatory order issued by the court under Article 23 3 of the Constitution and Rule 23 of the Constitution of Kenya Protection of Rights and Fundamental Freedoms Practice and Procedure Rules, The reasoning should be simple: a statutory provision under Section 7 should not claw-back the Courts jurisdiction under the Constitution.
With regard to the Conservatory orders sought before me, I must of course first caution myself that at this stage of the proceedings, I need not make any definitive findings of fact or law. Thus while I must review closely the parties respective cases I must avoid over-detailed discussions of the same.
The court at trial is to be given a complete liberty to hear the Petition without any pre-emption. Firstly, though, a quick reflection on the principles of conservatory orders. Stuck on a job that seemed simple at first? Hope you bought it from us because some customer service agent in India may not be able to walk you through it. Good question. Customer service is important with this versatile substance, but price is important to everyone too.
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