Giant Holdings Limited v Kenya Airports Authority [2010] KECA 370 (KLR)

IN THE COURT OF APPEAL

AT NAIROBI

CIVIL APPLICATION NO. 193 OF 2005

GIANT HOLDINGS LIMITED ………………………………………………APPLICANT

AND

KENYA AIRPORTS AUTHORITY.…..………………………………….RESPONDENT

CONSOLIDATED WITH

CIVIL APPLICATION NO. NAI. 139 OF 2007 (UR. 90/2007)

BETWEEN

GIANT HOLDINGS LIMITED ………………………………………………APPLICANT

AND

KENYA AIRPORTS AUTHORITY ………………..…………………….RESPONDENT

(Being an application for stay and injunction pending the hearing and determination of the appeal from the ruling and order of the High Court of Kenya at Nairobi (Ojwang, J.) dated 3rd June, 2005

in

H.C.C.C. No. 694 of 2003)

******************

RULING OF THE COURT

This ruling relates to two applications which were heard together.

The first and the main application viz Civil Application No. Nai. 193 of 2005was filed on 12th July, 2005.   It seeks two main reliefs under rule 5(2)(b) of the Court of Appeal Rules pending appeal from the decision of the superior court (Ojwang, J.) dated 3rd June, 2005 namely, a stay of execution of orders of the superior court; and  an order of injunction to restrain the respondent from granting an advertising concession agreement to any other party or doing anything that would terminate or breach the applicant’s rights and interest under an Advertising Concession Agreement dated 23rd December, 1999 and from dealing directly with the applicant’s agents.  While that application was pending for hearing the parties reached an agreement that an interim injunction be granted pending the hearing of the application and the court on 2nd August, 2005 recorded the consent order granting an interim injunction restraining the respondent, its officers, servants or agents from:

“entering into any further advertising concession agreement (other than the two agreements already extended and exhibited …)until the hearing and determination of the applicant’s notice of motion dated 8th July, 2005 and filed on 12th July, 2005. ”

By the 2nd application dated 14th March, 2007 and filed on 18th June, 2007 viz: Civil Application No. Nai. 139 of 2007, the applicant claims that the respondent has breached the interim injunction and seeks leave to apply for an order of committal for contempt of court against three officers of the respondent.

The dispute between the applicant, Giant Holdings Limited (GHL) and the respondent, Kenya Airports Authority (KAA) relates to an Advertising Concession Agreement dated 23rd December, 1999 by which KAA granted advertising services to GHL at KAA airports for a term of 10 years from 1st March, 2000 in consideration of GHL paying KAA 50% of the gross receipts from advertisements payable as stipulated in the Agreement. Clause 9 of the agreement prohibited GHL assigning, sub-contracting or sub-letting the contract without prior consent of KAA. That clause was amended by a further agreement dated 11th December, 2002 to provide that the consent of KAA should not be unreasonably withheld.

By Clause 13 of the Agreement KAA was entitled to terminate the agreement upon 90 days notice in writing if among other things GHL is in breach of any covenants terms or conditions stipulated under the agreement.

By a notice dated 15th April, 2003 the Managing Director of KAA gave a notice of termination of the Concession Agreement alleging breach of the agreement by:

(i)    Failure to submit contracts with advertisers prior to the installation of advertising display.

(ii)   erection of advertising displays without prior approval.

(iii)  sub-contracting and assigning the contract without  approval and

(iv)  failing to pay concession fees due in respect of the advertisement displays.

GHL by a letter dated 13th May, 2003 denied any breach and by a letter dated 27th June, 2003 demanded a notice of rescission of the notice to terminate the agreement.

The respondent failed to rescind the notice and on 9th July, 2003 GHL filed a suit against KAA claiming that KAA had no valid grounds for terminating the agreement and sought various orders of injunction, accounts for concession fees, general and aggravated damages for breach of contract.

By a notice of motion filed together with the suit on the same day (i.e. 9th July, 2003) GHL sought various interim injunctions pending the hearing of the suit.  On the same day GHL obtained exparte orders of injunction for a duration of 14 days pending the hearing of the application interpartes. It is clear from the replying affidavit sworn by John Joseph Tito on behalf of KAA that the exparte orders were extended from time to time but when application was adjourned on 20th January, 2004 the exparte order was not extended whereupon KAA by a letter of 30th January, 2004 acted upon the termination notice and terminated the agreement. Thereafter on 2nd March, 2004 the superior court reinstated the exparte injunction on the application of GHL.

At the hearing of the application in the superior court, counsel for KAA raised a preliminary objection to the suit and the application based on jurisdictional issue in accordance with the notice of preliminary objection filed on 22nd July, 2003 in addition to raising other grounds in opposition to the application.

It was contended by KAA’s counsel that in view of provisions of section 33(1) of the Kenya Airports Authority (Cap. 395 Laws of Kenya) (Act) the court had no jurisdiction to entertain the suit and the proceeding and thus the suit and the application were premature, misconceived, incompetent and complete nullity.

By section 12(3)(e) of the Act the KAA has power to;

“Determine, impose and levy rates, charges, dues or fees for any services performed by the Authority or for use by any person of the facilities provided by the Authority, or for the grant to any person of a licence, permit certificate, subject to the approval of the Minister.

And by section 12(3)(j) KAA is authorized to enter into the specified agreements.

Section 33(1) of the Act, the basis of the preliminary objection, provides:

”In the exercise of powers conferred by sections 12, 14, 15 and 16 the Authority shall do as little damage as possible, and, where any person suffers damage no action or suit shall lie but he shall be entitled to such compensation therefor as may be agreed between him and the Authority or, in default of an agreement, as may be determined by a single arbitrator appointed by the Chief Justice”.

The superior court in a lengthy ruling considered the issues raised in the application exhaustively and made findings, inter alia, that, section 33(1) of the Act mandatorily requires disputes to be resolved by arbitration as the first forum since arbitration had not been pursued the court lacked jurisdiction to hear and determine the disputes; that the court entertained doubts as to whether GHL had a prima facie case with a real possibility of success, and, lastly, that, refusal to grant an interlocutory injunction would not cause GHL irreparable harm as it could be compensated by award for damages.

GHL being aggrieved by the decision filed a notice of appeal and promptly filed Civil Appeal No. 130 of 2005.

In a normal application under rule 5(2)(b), an applicant is required to satisfy the court that the intended appeal or appeal is arguable and that unless the order sought is granted the appeal if ultimately successful would be rendered nugatory before the court can exercise its discretion in his favour. In this application however, it is contended by the KAA, among other things, that, there is nothing to stay as the superior court merely dismissed the application for interlocutory injunction; that the application for injunction pending appeal has been overtaken by events as KAA awarded advertising contracts to two other companies after the superior court dismissed the application for interlocutory injunction, and, that, if injunction is granted, it will have the effect of reviving a contract which has already been lawfully terminated. GHL, on the other hand, contends, inter alia, that the purported contracts with two companies are a sham meant to hoodwink the applicant and the court that the substratum of the application has been overtaken by events; that the contracts given to the two companies are in the nature of management or agency agreements and cannot be equated or substituted with exclusive Concession Agreement; that the two advertising contracts were scheduled to expire on 30th June, 2006 but were unlawfully extended, lastly that, KAA has indicated in writing that it would directly conduct advertising business itself.

It is convenient to deal with the stay and injunction application first.

We respectfully agree with submissions of KAA’s counsel that the application for stay of execution is misconceived. The superior court merely dismissed the GHL’s application for interlocutory injunction with costs. The superior court did not grant any positive relief to KAA nor order any party to do anything or refrain from doing anything.   The appellant has not specifically sought stay of execution regarding costs (see Western College of Arts & Applied Sciences v Oranga & Others [1976] KLR 63).

The application for injunction is also fraught with problems.

Firstly, the KAA gave a notice of termination of the Advertising Concession Agreement in accordance with Clause 13 of the Agreement which authorized KAA to terminate the contract on grounds of breach of any covenants terms or condition upon giving 90 days notice in writing. The notice of termination dated 15th April, 2003 should have taken effect from about 15th July, 2003 but an interim exparte injunction was granted by the superior court on 9th July, 2003 restraining KAA from terminating the Agreement. The interim injunction was subsisting during the pendency of the application save for a short interval, until 3rd June, 2005 when the superior court dismissed the application. The plaint on which the application for interlocutory injunction was pegged seeks as a first prayer an injunction restraining KAA from terminating or breaching the Advertising Concession Agreement. The first prayer in the interlocutory application (Chamber Summons) dated 9th July, 2003 similarly sought an injunction restraining KAA from terminating or breaching the Advertising Concession Agreement. In the instant application, GHL does not seek to restrain KAA from terminating the advertising concession agreement.  Since the relationship of the parties was contractual in nature, it follows that the contract was terminated in the accordance with the notice of termination from the date the superior court dismissed the application for interlocutory injunction and implicitly discharging the subsisting interim orders. The contract remains terminated in law until a court declares otherwise. It means therefore that there is no impediment to entering into a similar agreement with any other party. Thus an order of injunction to restrain KAA from granting an advertising concession to any other party would not only have no foundation but also it would have the effect of reviving a contractual relationship which does not now exist.

Secondly, KAA maintains that after the superior court dismissed the application for interlocutory injunction it entered into two advertising agreements

with two other companies which agreements are annexed to the replying affidavit.

The first agreement dated 23rd June, 2005 granted Media Initiative East Limited (Media) a licence in the form of a concession to advertise at six airports for a period of twelve months.

The second agreement dated 28th June, 2005 grants Ogilvy East Africa Limited (Ogilvy) a licence – in form of a concession to advertise at Jomo Kenyatta International Airport for a period of twelve months. KAA further states that the concessionaires took over the concession areas covered by the terminated contract and entered into advertising agreements with various advertisers.

The applicant admits that the two agreements cover the locations upon which it had been granted advertising concession but asserts that the contracts were of a different nature and further that the contracts have been unlawfully extended beyond the contractual period of one year.

The two agreements with Media and Ogilvy speak for themselves. The agreements refer to each as an advertising concession. The two companies are not parties in this dispute.  Furthermore the two agreements are not the subject of this dispute.  It would be inappropriate and highly irregular if this Court were to scrutinize the two agreements in this dispute and to make a finding whether or they have been lawfully extended.   Suffice to say that the KAA has demonstrated that what GHL seeks to restrain has already happened and that the application has been overtaken by events.

Thirdly, as conceded by the GHL’s counsel the 10-year Advertising Concession Agreement which commenced on 1st March, 2000 has already expired by effluxion of time. Although the GHL’s counsel intimates that the applicant has given a notice of continuance he had not demonstrated that the agreement has provision for extension or that KAA has agreed to extend the agreement. The reality which GHL has to face is that the contract which was the basis of the suit and the application in the superior court and also the basis of the present application has run its full course and has been terminated by effluxion of time. The result is that GHL has no contractual rights which can be protected by an order for injunction pending appeal.

The second application is brought on the basis that the consent interim injunction granted on 2nd august, 2005 by consent exempted only the existing contracts given to Media and Ogilvy respectively entered into in June 2005 and which were to expire in June 2006 and did not exempt the extension of the two contracts. The correspondence shows that KAA contended that the two contracts had an in built holding over clause. The issue of whether or not the two contracts could be extended is therefore contentious as between GHL and KAA. As we have already observed above it would be wrong if the Court were to determine the contractual rights of parties who are not before the Court and when there is no dispute between the parties to the contract. Moreover it would be futile to allow GHL to litigate any further when the underlying ten-year contract has been terminated by both a contractual notice of termination and by effluxion of time. Indeed, we doubt whether GHL would have locus standi to prosecute the intended application.

For the foregoing reasons we dismiss both the first application for stay and injunction and the second application for leave to apply for order of committal for contempt with costs to the respondent.

Dated and delivered at Nairobi this 19th day of March, 2010

P. K. TUNOI

………………………

JUDGE OF APPEAL

E. O. O’KUBASU

………………………

JUDGE OF APPEAL

E. M. GITHINJI

………………………

JUDGE OF APPEAL

I certify that this is a

true copy of the original.

DEPUTY REGISTRAR