Savannah Heights Limited v Savannah Cement Limited & 3 others [2022] KEHC 110 (KLR)

Savannah Heights Limited v Savannah Cement Limited & 3 others (Civil Case 170 of 2016) [2022] KEHC 110 (KLR) (Commercial and Tax) (11 February 2022) (Ruling)

Neutral citation: [2022] KEHC 110 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts Commercial and Tax Division)

Commercial and Tax

Civil Case 170 of 2016

DAS Majanja, J

February 11, 2022

Between

Savannah Heights Limited

Plaintiff

and

Savannah Cement Limited

1st Defendant

Seruji Limited

2nd Defendant

Wanho International Limited

3rd Defendant

Acme Wanji Investments Limited

4th Defendant

Ruling

1. What is before the court for determination is the 2nd Defendant’s Notice of Motion dated 13th July 2021 mainly seeking the dismissal of the Plaintiff’s suit for want of prosecution. The application is supported by the affidavits Benson Ndeta sworn on 13th July 2021 and 17th September 2021 respectively. It is opposed by the Plaintiff through the Replying Affidavit of John Gachanga sworn on 8th October 2021. The parties have also filed and relied on their respective written submissions which I shall briefly summarise below.

2. The Plaintiff filed this suit by the Plaint dated 12th May 2016 together with an application of even date seeking invoking the provisions of section 7 of the Arbitration Act, 1995 seeking interim prayers of protection pending hearing and determination of a shareholder dispute before an arbitral tribunal arising from a Shareholders Agreement dated 27th July 2010.

3. According to the 2nd Defendant, the alleged shareholder dispute is for determination through arbitration and not this court whose jurisdiction can only be invoked upon determination by the arbitral tribunal through the processes provided under the Arbitration Act. That the limitation of the court from interfering with the arbitration process is grounded in section 10 of the Arbitration Act and under various doctrines including kompetenz kompetenz which empower the arbitral tribunal to determine whether it has jurisdiction.

4. The 2nd Defendant contends that the court’s jurisdiction is limited to the granting or rejecting the interim prayer of protection as sought by the Plaintiff and which in effect renders the plaint a shell as the issues left for determination belong to the arbitral tribunal. It adds that should the court proceed to determine the issues presented in the plaint, it would be usurping the jurisdiction of the arbitral tribunal and thus should in the circumstances down its tool as it lacks jurisdiction. In essence, the Plaintiff submits that the cause of action sustaining the plaint is spent once the court either grants or refuses an order for interim measure of protection. It maintains that the plaint should be struck out for failing to disclose a reasonable cause of action as it is merely a vehicle to approach court to seek interim measures of protection as sought in the said application dated 12th May 2016. The 2nd Defendant cites Coast Apparel Epz Limited v Mtwapa Epz Limited & another MLND HCCC No. 12 of 2017 [2017] eKLR in support of its submissions.

5. The 2nd Defendant further relies on Speaker of National Assembly vs Njenga Karume [1992] eKLR to stress that once a party elects to seek through a process that is statutorily known, then then law requires it to complete the entire process and that they are estopped from reneging on this process. The 2nd Defendant accuses the Plaintiff of presenting its case to the Competition Authority and not following through on the Authority’s determination by way of an appeal. It further accuses the Plaintiff of abandoning that procedure and seeking to refer the dispute to arbitration and determination by this court. It therefore submits that these proceedings are an abuse of the court process and that the court should exercise its inherent jurisdiction to strike out the suit and stop the Plaintiff from filing multiple suits over the same dispute.

6. As regard the issues raised in the Plaint, the 2nd Defendant accuses the Plaintiff of enjoying a banking facility from KCB Bank secured by, inter alia, the 2nd Defendant hence it cannot deny that the 2nd Defendant is not a shareholder having accepted the shareholding of the 2nd Defendant during the signing of the facility. It also states that the 1st Defendant held its General Meeting pursuant to the court ruling delivered in Seruji Limited v Savannah Cement Limited COMM MISC. APPL. No. 445 of 2021 (OS) and the interim measure of protection of barring the 1st Defendant from holding a General Meeting has been overtaken by events. Consequently, the 2nd Defendant urges the court to dismiss this suit and application for being frivolous, vexatious, scandalous and an abuse of the court process.

7. As regards dismissal for want of prosecution, the 2nd Defendant cites Ivita v Kyumbu NRB HCCC No. 340 of 1971 [1975] eKLR where the court established that where there is prolonged and inexcusable delay in prosecuting the suit leading to injustice, the suit ought to be dismissed for want of prosecution. It therefore submits that the Plaintiff has not prosecuted this suit for a period of more than two years and has not given any explanation for such delay. It refers to the ruling in Misc. 445 of 2021 where the court was perturbed by the delay. It submits that the explanation offered by the Plaintiff based on the COVID 19 pandemic and on the basis of a pending appeal are insufficient grounds. It submits that there was no pandemic between 2017 to early 2020 and that the pending appeal did not amount to a stay of proceedings.

8. The 2nd Defendant states that it continues to be prejudiced by the continuation of this suit as it acquired shares in the 1st Defendant in 2015, which shares were valued at 25,000,000 USD (KES. 25,000,000,000. 00) and that the 2nd Defendant expected to recoup this investment through the ordinary business of the Company. However, the pendency of this suit and the media attention through several newspaper publications has brought great public attention has caused great damage to the reputation of the 1st Defendant and the 2nd Defendant. Consequently, this has turned away future investors causing huge losses in the company and also affected the day to day running of the company together with its employees.The Plaintiff’s Submissions

9. The Plaintiff submits that its application dated 12th May 2016 seeking interim measures of protection has never been heard on merit and even assuming the Plaint was merely a vehicle for accessing the Court to obtain the interim measures of relief, the suit is still viable and the same ought to be sustained as it is the anchor upon which the undetermined application is founded. The Plaintiff submits that the suit is well pleaded and elaborated with particulars of fraud, illegality and breach of contract and that Summons to Enter Appearance in this matter were duly extracted and served upon the Defendants as required by law. In the circumstances, the allegation that the suit raises no cause of action is unfounded and false.

10. On the issue of the Plaintiff presenting its grievance to the Competition Authority, the Plaintiff submits that at the Competition Authority, the grievance was very narrow and strictly limited to the Plaintiff’s contention that section 42(4) of the Competition Act had been violated in the manner in which the purchase price of the shares had been paid by the 2nd Defendant to the 3rd and 4th Defendants. It contends that the complaint to the Competition Authority was very targeted and that the jurisdiction to determine whether section 42(4) had been breached regarding payment of the purchase price of the shares was within the purview of the Competition Authority. It also states that the complaint was only one aspect of the Plaintiff’s challenge to the entire process of the sale and transfer of the shares. The Plaintiff submits that in this suit, it did not make any complaint touching on section 42(4) of the Competition Act and that the suit largely addresses breach of the Shareholders Agreement by the 3rd and 4th Defendants in the course of the sale and transfer of their shares to the 2nd Defendant. The Plaintiff adds that the breach of contract by the 3rd and 4th Defendants also extends to the Memorandum of Understanding dated 7th March, 2010 which had been executed between the Plaintiff and the 3rd Defendant. Therefore, the Plaintiff submits that the 2nd Defendant is misguided in its argument that the Plaintiff has seemingly elected two different forums to ventilate its dispute. The Plaintiff also maintains that the Competition Authority is an arbitral tribunal or a court of law capable of determining whether or not the entire process of the sale and transfer of shares by the 3rd and 4th Defendants to the 2nd Defendant was validly undertaken. The Plaintiff thus urges the court to reject this argument.

11. As regards the allegation that this suit is frivolous, vexatious and scandalous, the Plaintiff submits that there is no co-relation whatsoever which has been shown between filing of the suit and application by the Plaintiff and also signing a facility letter from the Bank in 2015 which shows that this suit is frivolous, scandalous or vexatious. That the signing of the facility letter from the Bank was done in 2015 when the Plaintiff was trying to amicably resolve the grievances it had regarding the sale and transfer of shares by the 3rd and 4th Defendants to the 2nd Defendant which efforts were specifically being explored by Mr. John Gachanga and Mr. Donald Kiboro Mwaura on one hand and Mr. Benson Ndeta who was and still is a Director and Shareholder in the 2nd Defendant on the other hand. The Plaintiff submits that the fact that it signed the facility letter from the Bank containing a section for the 2nd Defendant to also sign as a Shareholder cannot by any stretch of the imagination be construed or deemed to mean that the Plaintiff had recognised the 2nd Defendant as a shareholder; or that the 2nd Defendant’s shareholding was not disputed.

12. The Plaintiff submits that for the avoidance of doubt, the said facility letter required the Plaintiff to execute its part on account of it being a valid, known and existing shareholder of the 1st Defendant and that the said facility letter did not contain any provision or clause providing that the execution of the said letter by the Plaintiff would be taken to be an endorsement or recognition of the 2nd Defendant as a new and valid Shareholder of the 1st Defendant. Consequently, the Plaintiff presents that the doctrine of estoppel does not apply in any way in this proceedings and is not co-related to the Plaintiff's act of signing the facility letter from KCB in 2015.

13. The Plaintiff explains that the failure to prosecute this suit was occasioned by; the non-existence of Order 17 rule 2(5) that was cited by the 2nd Defendant’s advocates, prolonged duration of the appeal by the parties at the Court of Appeal being Savannah Heights Limited v Seruji Limited and Savannah Cement Limited NRB CA Civil Appeal No. 199A of 2016 which took about 5 years, a failed attempt by directors of the Defendants to buy off shares in the Plaintiff, a court filling receipt scandal in 2019 where the instant suit file was affected and subjected to investigations by the DCI and the COVID 19 pandemic. The Plaintiff thus submits that these reasons are justifiable in explaining why the suit has never been prosecuted and it urges the court to find merit in the said reasons.

14. The Plaintiff further submits that no prejudice whatsoever has been shown to be suffered by the 2nd Defendant and this allegation remains just that; an allegation and that that media reports regarding the ongoing shareholders dispute in Court has not been shown in anyway by way of any evidence to have prejudiced the 2nd Defendant which remains a disputed shareholder in the 1st Defendant. That even assuming that there was any prejudice that has been suffered by the 2nd Defendant on account of factual newspaper publications about the ongoing shareholders dispute, which is denied, such prejudice has not been shown to be attributable to the Plaintiff and if such prejudice really existed, the 2nd Defendant would have a remedy as against the publishers of those media articles.

15. In conclusion, the Plaintiff submits that the 2nd Defendant has failed to demonstrate or make out a clear case to justify the dismissal or striking out of this suit as sought in its application. Consequently, the Plaintiff prays that the Court do reject all the grounds advanced in support of the application dated 13th July, 2021 and for the Court to proceed to dismiss the said application with costs to the Plaintiff.Analysis and Determination

16. From the arguments I have outlined above, the 2nd Defendant seeks to dismiss the suit on several grounds among them dismissal of the suit for want of prosecution. First off the bat, I am not convinced that by filing a complaint before the Competition Authority established under the Competition Act merely disentitles a party to approach the court or proceed to arbitration. This depends on the nature of the complaint and the jurisdiction of the alternative statutory process. In this case, the remit of the Competition Authority is narrow and limited to matters concerning competition and the mere fact that the Plaintiff invoked a statutory procedure does not disentitle it from seeking relief either from the court or invoking the arbitral process.

17. On the other hand, the arbitral process is a consensual process which has been invoked by one party. It is not in dispute that the Plaintiff filed this suit for the purpose of seeking an interim order of protection pending invocation of the arbitral clause in the agreement between the parties. Having taken such a step to obtain interim relief, the Plaintiff must be bound by its election to proceed to arbitration. Since the dispute upon which its seeks interim relief falls within the purview of arbitration, the Plaintiff cannot seek to separate aspects of the dispute and then demand to proceed with the suit to its logical conclusion. I therefore agree with the decision in Coast Apparel EPZ Limited v Mtwapa EPZ Limited and another (Supra) where the court observed that:In addition, after the grant or failure to grant an interim measure under Section 7 of the Arbitration act, there is no ending suit because the substance of the suit under section 7 is grant or refusal of interim measure itself. In essence, the Plaint in a matter like the one before this court is merely a vehicle for accessing court. It bears no cause of action by itself. Once the application for interim orders of protection is dispensed with the plaint becomes a shell. In such circumstances, the answer lies in striking out the Plaint…

18. There is no dispute that the application for interim measure of protection has not been prosecuted hence the next and final issue is whether this suit should be dismissed for want of prosecution. The Court of Appeal in Peter Kipkurui Chemoiwo v Richard ChepsergonELD CA Civil Appeal No. 58 of 2018 [2021] eKLR affirmed the principles and test to be applied in an application for want of prosecution as set out in Ivita v Kyumbu (Supra) where Chesoni J., held as follows:The test is whether the delay is prolonged and inexcusable, and, if it is, can justice be done despite such delay. Justice is justice to both the Plaintiff and Defendant; so both parties to the suit must be considered and the position of the judge too, because it is no easy task for the documents, and, or witnesses may be missing and evidence is weak due to the disappearance of human memory resulting from lapse of time. The Defendant must however satisfy the court that it will be prejudiced by the delay or even that the plaintiff will be prejudiced. He must show that justice will not be done in the case due to the prolonged delay on the part of the plaintiff before the court will exercise its discretion in his favour and dismiss the action for want of prosecution. Thus, even if delay is prolonged if the court is satisfied with the plaintiff's excuse for the delay, the action will not be dismissed, but it will be ordered that it be set down for hearing at the earliest available time.

19. The fact that there has been a delay in the prosecution of this suit is not in doubt. The question is whether the Plaintiff has advanced justifiable reasons to excuse the delay given that the suit is one founded on seeking interim relief pending arbitration. I do not find any of the reasons advanced by the Plaintiff justifiable and I do not condone the delay in the prosecution of this suit which includes prosecution of its application for interim relief pending arbitration.

20. I am in agreement with the 2nd Defendant, there was no order staying these proceedings pending any appeal in the Court of Appeal including an appeal from a related matter. Furthermore, the fact that there was an investigation on a court filing receipt scandal in 2019 did not preclude the Plaintiff from prosecuting its suit. Further still, the Plaintiff has not explained why, despite filing the suit in 2016, no arbitration proceedings have ever been commenced by it yet there is a suit seeking interim relief for that purpose. An interim order of protection is meant to protect the subject matter of arbitration and that for it to be granted, the court must be satisfied that the parties have already commenced the process for putting in place an arbitral panel or arbitration proceedings have already started. It is not an order issued in a vacuum as it is premised on intended or ongoing arbitration proceedings (see Coast Apparel Epz Limited v Mtwapa Epz Limited & another (Supra) ).

21. I also hold that even though court operations were adversely affected by the COVID 19 pandemic, the Plaintiff has not shown what steps it took to have its suit and application prosecuted once the Chief Justice issued directions for dealing with matters during the pandemic. In addition, the court has always held that the fact that parties are engaged in negotiations for an out of court settlement does not bar a Plaintiff from fixing the case for hearing (see Catherine Nyambura Kamau v Nation Media Group & 2 others NRB HCCC No. 706 of 2009 [2015] eKLR). In any case, the Plaintiff never informed the court of these negotiations and thus, this ground is not valid to excuse the Plaintiff’s delay in prosecuting its suit.

22. I am satisfied that the continued pendency of this suit shall occasion substantial prejudice to the parties as commercial entities. On the other hand, dismissal of the suit, which as intended was to support an application for interim relief pending arbitration, would pave way for the arbitration process to be carried forward. It is for this reason, I have restrained myself from commenting on the merits or otherwise of the case as the process of arbitration and its incidents is still open to the parties to pursue.Disposition

23. For the reasons I have set out above, I allow the 2nd Defendant’s Notice of Motion dated 13th July 2021 with the result that the Plaintiff’s suit be and is hereby dismissed for want of prosecution with costs to the Defendants.

DATED and DELIVERED at NAIROBI this 11TH day of FEBRUARY 2022. D.S. MAJANJAJUDGECourt Assistant: Mr M. OnyangoMr Wandati instructed by Kisilu, Wandatu and Company Advocates for the PlaintiffMr Ochieng instructed by Ochieng Teddy Advocates for the 2nd Defendant