Kool Communications Ltd v Community Broadcasting Services [2022] KEHC 1734 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT

AT BUNGOMA

CIVIL SUIT NO. 18 OF 2019

(CONSOLIDATED WITH HCC 19 OF 2019)

KOOL COMMUNICATIONS LTD.............................................................PLAINTIFF/APPLICANT

VERSUS

COMMUNITY BROADCASTING SERVICES..............................................................DEFENDANT

RULING

Contemporaneous with the plaint, the applicant filed an application dated 4th December 2019 seeking the following principal orders;

1. An order of temporary injunction do issue ex parte in the interim against the defendant/respondent or their servants agents or assigns from jamming or interfering with frequency 91. 7 MHz transmitted in Webuye Sub County and its environs or in any other way pending the hearing and determination of this application inter partes.

2. An order of temporary injunction do issue ex parte in the interim against the defendant/respondent or their servants agents or assigns from jamming or interfering with frequency 91. 7 MHz transmitted in Webuye Sub County and its environs or in any other way pending the hearing and determination of the main suit.

3. Upon order (1) or (2) above being granted, the matter be referred to the Chartered Institute of Arbitrators-Kenya Chapter within 14 days for determination.

4. The Director General Communications Authority of Kenya to comply with this order.

5. Costs of the application be borne by the defendant/respondent.

The application is supported by the affidavit of Johnstone Walubengo Kibunguchi, the applicant’s Director sworn on the 4th of December 2019. He depones that the applicant entered into a Memorandum of Understanding with the respondent in 2005 over the running and the management of the frequency. That pursuant to the aforesaid memorandum, the applicant purchased the equipment to be used and has over the years since then been managing the frequency and has been tax compliant.

That on 27/5/2019, the respondent wrote to the applicant asking the applicant to cease using the frequency and instead of referring the matter to arbitration as stipulated by the memorandum, the respondent jammed the frequency locking out the applicant putting it at risk of loss since it won’t be able to pay its 20 employees, collect debts and pay its creditors. That it has incurred and continues to incur losses as a result of the respondent’s actions.

By consent, the parties narrowed down the issues to;

1.  Whether the memorandum of understanding dated 16th November 2005 is valid or not.

2.  Whether the court has jurisdiction to determine the matter conclusively in light of clause 1. 7 of the memorandum of understanding.

The application was disposed of by way of written submissions. Only the respondent complied with the order.

On the first issue, it is submitted that according to the terms of the memorandum, a slight breach of the express terms would terminate the contract. That the applicant breached all the terms and the MOU was thereby terminated. The respondent enumerated the salient features of the MOU entitling it to repudiate the agreement.

It is submitted that the MOU did not vest any proprietary rights on the plaintiff, the plaintiff mismanaged the business thus running into losses, the applicant did not transfer any shares to the respondent despite the provisions of the MOU that the former would own 67. 55% and the latter 32. 5%, the applicant failed to produce any financial statement yet the applicant had admitted in Webuye Civil Suit 222/19 that it had sold out 20 % stake to a third party,

The respondent further submits that the applicant continued to operate the frequency without paying the licence fees yet it was mandated by the MOU to manage the day to day operations of the business. That the applicant failed to disclose any profits/losses and that the parties intended the MOU would lapse after 5 years.

The defendant submits that the defendant was granted a licence by the Communications Authority on 21/5/2019 with a condition that the defendant would not sub-let the licence without the consent of the authority.  That this term supersedes the terms of the licence that the plaintiff had been operating. In this regard, the authorities in Kisumu Paper Mills Ltd Vs National Bank of Kenya & 2 others (2006)eKLR, Hassan Zubeidi Vs Patrick Mwangangi Kibaiya & another (2014)eKLRand Osteria Ice Cream Limited Vs junction limited (TJL) (2011)eKLR have been cited in support.

On the second issue, the defendant submits that a dispute can only be referred to mediation on agreement by the parties if the agreement is in the form prescribed by Section 4 of the Arbitration Act, 1995. That the prayer by the plaintiff that the dispute be referred to arbitration cannot be granted since the agreement is null and void. Reference has been made to Section 6 of the Arbitration Act for the proposition that the entire contract and the arbitration clause is void, inoperative and or incapable of being performed due to effluxion of time and the issue of a new licence by the Communications Authority.

Since the parties had by consent framed the issues for determination, the court is of the view that the issue of jurisdiction ought to be determined first since it goes to the root of the matter. It is now trite law that jurisdiction is everything. The same is conferred on the court by the constitution and statute.

The jurisdiction of the High Court is conferred by Article 165 of the Constitution and donates to it unlimited original jurisdiction over civil matters. In Owners of the Motor Vessel “Lillian S” Vs Caltex Oil (Kenya) Ltd [1989] eKLR,Nyarangi JA held;

Jurisdiction is everything. Without it, a court has no power to make one more step. Where a court has no jurisdiction, there would be no basis for a continuation of proceedings pending other evidence. A court of law down tools in respect of the matter before it the moment it holds the opinion that it is without jurisdiction.

The respondent’s challenge to the claim before the court is on the basis that the arbitration clause in the MOU is inoperative due to effluxion of time. That the memorandum has never been reviewed since the year 2005 and therefore automatically became inoperative.

A look at the memorandum of understanding dated 16/11/2005 states as follows as regards the lifetime of the memorandum;

1. 6 contract/agreement periodic reviews: this MOU including the forthcoming legal contract to be drafted and signed by the parties will be reviewed and negotiated after every 5 years from November, 16, 2005.

The terms are clear and self-explanatory. When the respondent sought to terminate the use of the frequency, the applicant moved court seeking orders to have the dispute arbitrated by the Chartered Institute of Arbitrators-Kenya. This is premised on the dispute resolution mechanism clause contained in clause 1. 7 of the MOU which provides;

Any controversy or claim arising out of or relating to this agreement shall only be settled by arbitration in accordance with the rules of the Kenyan arbitration association, and shall be enforceable in any court of law in Kenya.

Arbitration in Kenya is governed by the Arbitration Act, 1995 and the Rules made thereunder. Section 6 thereof provides;

(1) A court before which proceedings are brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than the time when that party enters appearance or otherwise acknowledges the claim against which the stay of proceedings is sought, stay the proceedings and refer the parties to arbitration unless it finds—

(a) That the arbitration agreement is null and void, inoperative or incapable of being performed; or

(b) That there is not in fact any dispute between the parties with regard to the matters agreed to be referred to arbitration.

It is no doubt the memorandum contains an arbitration clause as reproduced above. As to whether the clause is inoperative or not for whatever reasons is fact that is to be determined in the main hearing. What is before the court in the instant application is a prayer for temporary relief. Section 6 of the Arbitration Act gives the procedure where a party challenges a suit for failure to invoke the arbitral process.

Under Section 4(1) of the Arbitration Act, an arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. In this case, the arbitration agreement is contained in clause 1. 7. In the instant proceedings, the respondent’s contention is that the agreement has become inoperative due to the effluxion of time. It is indeed true from the reading of the agreement that the same was to be reviewed after five years. It is a finding of the court that failure to review an agreement does not oust the jurisdiction of the court. In fact, it is such facts that bring the matter within the purview of the court for determination.

The applicant in its pleadings avers that since the arbitration process does not issue of interim orders, it is entitled to move court for orders pending determination of the arbitral process. Section 7(1) of the Arbitration Act provides;

It is not incompatible with an arbitration agreement for a party to request from the High Court, before or during arbitral proceedings, an interim measure of protection and for the High Court to grant that measure.

From the above provision, it is clear that the court has a limited mandate under the Act. The court is of the view that by granting a temporary relief such as sought by the applicant, the court will have not determined the matter. It will have just given a temporary relief pending the referral of the matter to arbitration and the ultimate determination.

Having reviewed the matter, the court in the interest of justice hereby issues an order of status quo to be maintained pending the referral of the matter to arbitration which should be concluded within 60 days from the date of this ruling failure of which either party shall be at liberty to apply. This is informed by the fact that the applicant still uses the frequency.

Consequently, the issue of the validity of the memorandum of understanding is an issue within the province of the main suit. The court will not address the issue at this stage.

DATED AT BUNGOMA THIS 11TH DAY OF FEBRUARY, 2022

S. N. RIECHI

JUDGE