[2017] KEHC 10006 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

MILIMANI LAW COURTS

COMMERCIAL & TAX DIVISION

CIVIL CASE NO. 168 OF 2007

BUTALI SUGAR MILLS LIMITED...................................PLAINTIFF

VERSUS

WEST KENYA SUGAR COMPANY LIMITED...........1ST DEFENDANT

KENYA SUGAR BOARD........................................2ND DEFENDANT

RULING

[1]This Ruling is in respect of the Preliminary Objection raised herein by the 1st Defendant vide the Notice of Preliminary Objection dated 22 April 2016, by which notice was given to the effect that, at the hearing of this suit, the 1st Defendant would raise a Preliminary Objection on a point of law on the grounds that the Court of Appeal in its judgment in Kisumu Civil Appeal No. 89 of 2011 having declared the Plaintiff's licence to operate a sugar mill null and void, the Plaintiff has no cause of action herein. The 1st Defendant thereafter filed written submissions in support of the Preliminary Objection upon directions being given by the Court to that effect on 26 April 2016.

[2]The Plaintiff, in response to the 1st Defendant's Notice of Preliminary Objection, also filed a Notice of Preliminary Objection dated 26 May 2016 on the 26 May 2016, contending that the 1st Defendant's Notice of Preliminary Objection filed on 22 April 2016 is not a Preliminary Objection at law. The Plaintiff also filed written submissions dated 25 May 2016 in opposition to the 1st Defendant's Preliminary Objection. Thereafter, on the 30 May 2016, the 2nd Defendant's written submissions were filed on their behalf by Hayanga & Company Advocates; and upon a response being made to the Plaintiff's Notice of Preliminary objection dated 25 May 2016 by the firm of Sobhab H. Shah & Goswami Advocates, Counsel for the Plaintiffs, Ochieng Onyango Kibet and Ohaga, filed the written submissions dated 19 October 2016. These are the documents that fall for my consideration in this Ruling. The submissions were highlighted on 22 February 2017 by Messrs Ochieng' Oduolfor the Plaintiff, Nagpal and Mr. Goswami for the 1st Defendant and Kemboy for the 2nd Defendant.

[3] A perusal of the court record shows that the suit was instituted on 30 March 2007 by the Plaintiff, Butali Sugar Mills Limited, against the two Defendants, West Kenya Sugar Company Limited and Kenya Sugar Board, for judgment in the sum of Kshs. 590,630,441/= being the loss incurred as a consequence of the unlawful interference with its business. The Plaintiff also prayed for interest and costs as well as any other or further relief that the Court may deem fit to grant. The Plaintiff's cause of action was that on or about the 27 July 2005, the 1st Defendant filed a Judicial Review Application in the High Court of Kenya at Nairobi, being Miscellaneous Civil Application No. 1127 of 2005: Republic vs. Kenya Sugar Board, Ex parte West Kenya Sugar Company Limited; the Ministry of Agriculture and Butali Sugar Mills Limited, to challenge and quash the registration of the Plaintiff as a sugar mill operator.

[4] It was further averred in the Plaint that the 1st Defendant also applied for and obtained ex parte orders from the High Court on 27 July 2005 which had the effect of halting its operations, transactions and business in connection with its objects and undertakings as a registered sugar miller; and that being aggrieved by the said orders, the Plaintiff applied for their setting aside. However, on the 21 July 2006 the Defendants entered into an agreement for the withdrawal of the Judicial Review Application on the 2nd Defendant's undertaking not to grant the Plaintiff or any other person or corporate body, a miller's licence to operate within a radius of 24 kilometers of the 1st Defendant's mill. Pursuant to that agreement, the 1st Defendant entered into a consent with the 2nd Defendant dated 27 July 2006to withdrawn the entire Judicial Review Application No. 1127 of 2005, thereby compromising the Plaintiff's application without any reference to the Plaintiff.

[5] It was further averred by the Plaintiff that the overall effect of the filing of Miscellaneous Civil Application No. 1127 of 2005, the Agreement dated 21 July 2006 and the consent of 27 July 2006 was unlawful interference with its business with a view of scuttling the same; and that as a result, it suffered loss to the tune of Kshs. 590,630,441/=; which is what the Plaintiff claims herein. The Defendants filed their respective Statements of Defence which were replied to by the Plaintiff on 2 July 2007. Thus, by the time the Notice of Preliminary Objection was filed, the parties were in the process of complying with the Practice Directions of the High Court of Kenya Commercial & Admiralty Division, Gazette Notice No. 5179 of 2014.

[6] The foregoing forms the backdrop of the 1st Defendant's Preliminary Objection and, given the nature of the Plaintiff's Preliminary Objection, I propose to treat it as a response to the 1st Defendant's Preliminary Objection, which is really is its purport. Both sides relied on the case of Mukisa Biscuits Manufacturing Co. Ltd vs. West End Distributors [1969] EA 696 being the touchstone on what amounts to a preliminary objection. It was held thus:

"... a preliminary objection consists of a point of law which has been pleaded, or which arises by clear implication out of pleadings, and which if argued as a preliminary point may dispose of the suit. Examples are an objection to the jurisdiction of the court or a plea of limitation or a submission that the parties are bound by the contract giving rise to the suit to refer the dispute to arbitration."

[7]Having carefully considered the pleadings and the 1st Defendant's Notice of Preliminary Objection and the submissions filed herein, it is manifest that what the 1st Defendant has raised has nothing to do with the jurisdiction of the Court to handle this suit or the Statute of Limitations or Arbitration. The Preliminary Objection is based on the Court of Appeal decision attached thereto, which was delivered on 19 September 2014 in Kisumu Civil Appeal No. 89 of 2011: West Kenya Sugar Company Ltd vs. Kenya Sugar Baord and Butali Sugar Mills Ltd [2014] eKLR. To enable the Court appreciate the background of that decision, Counsel provided additional information in the 1st Defendant's written submissions.

[8] According to those submissions, the genesis of this litigation is the registration of the Plaintiff herein by the 2nd Defendant on 13 April 2005 as a sugar miller; and that the said licence was issued in total contravention of the repeated assurances and representations made by the 2nd Defendant to the 1st Defendant that it would not grant such a licence. It was submitted that on the basis of that assurance, the 1st Defendant proceeded to invest Kshs. 3,500,000,000/= in its business, including expansion thereof and the purchase of machinery and equipment to increase its sugar production capacity; and that to finance the development of some 670 hectares of sugarcane belonging to its outgrowers, the 1st Defendant spend a further Kshs. 423,000,000/=.

[9] It was further submitted that, having rejected three previous applications by the Plaintiff for a licence to construct and operate a sugar mill within the exclusive zone of the 1st Defendant, it was inexplicable that the 2nd Defendant accepted the fourth application; and on account thereof, the 1st Defendant filed High Court Miscellaneous Civil Application No. 1127 of 2005 for judicial review. Counsel added that following a lengthy period of negotiations between the parties to the aforesaid Judicial Review proceedings, the Defendants entered into a written agreement dated 21 July 2006 which paved way for the withdrawal of High Court Miscellaneous Civil Application No. 1127 of 2005.

[10]According to the 1st Defendant, in breach of the aforesaid agreement, and after the withdrawal of the Judicial Review Application aforementioned, the 2nd Defendant entertained an application by the Plaintiff for a licence to construct a sugar mill within its exclusive zone; this is what prompted the filing of Nairobi High Court (Milimani Commercial Courts) Civil Case No. 206 of 2010, in which an application for injunction was made to restrain the Kenya Sugar Board from issuing entertaining the application by Butali Sugar Mills Ltd for a licence. The application was dismissed by Koome J, but that suit is still pending hearing and final determination. In the meantime, another application, Judicial Review Application No. 17 of 2010, was filed in Kisumu High Court by Butali Sugar Mills Ltd to, inter alia, compel Kenya Sugar Board to issue a licence to enable it commence the milling of sugar. The orders were granted, and that is what provoked the filing of Civil Appeal No. 89 of 2011,which is the bedrock of the 1st Defendant's Preliminary Objection.

[11] It is thus the contention of the 1st Defendant that, the Court of Appeal having held in Civil Appeal No. 89 of 2011 that Butali Sugar Mills Ltdhas no valid licence to operate a sugar mill, it cannot make a claim for any damages for loss of profit, or costs of construction of the factory, as has been claimed in this suit; and that these are issues that fall for determination in HCCC No. 206 of 2010; and therefore that the hearing of this case should await the result of HCCC No. 206 of 2010.

[12] The Plaintiff opposed the Preliminary Objection, pointing out that what has been raised as a Preliminary is not in reality a Preliminary Objection for the reason that it is based on contested facts which will require proof at the trial. In particular, the Plaintiff disputed the contention of the 1st Defendant that the Court of Appeal in Kisumu declared the Plaintiff's licence to operate a sugar mill null and void; and contended that it has been issued with annual milling licences since then and was holding a current milling licence as at 26 May 2016 when its Counsel filed submissions herein. According to the Plaintiff the Court of Appeal order was as follows:

"Order of mandamus compelling Kenya Sugar Board to issue an operating licence, we grant an order of mandamus compelling Kenya Sugar Board to hear and determine the application for a licence by Butali Sugar Mills Limited dated 10th April 2010 within a reasonable time and according to the law giving the appellant a right to be heard in opposition."

[13] It was further submitted, on behalf of the Plaintiff, that this suit is a claim for loss and damage incurred as a result of a stay order issued in Nairobi Judicial Review Application No. 1127 of 2005, which was withdrawn by the Defendants by consent, and in which an Undertaking as to Damages had been given by the 1st Defendant; and that it has no correlation with the outcome of Civil Appeal No. 89 of 2011 or HCCC No.206 of 2010. It was therefore the contention of the Plaintiff that the 1st Defendant's Preliminary Objection is merely intended to obstruct the disposal of the present suit; and that it is frivolous, mischievous and amounts to a gross abuse of the court process and should therefore be dismissed with costs.

[14] The Plaintiff's arguments were supported by Counsel for the 2nd Defendant, who in their written submissions filed on 30 May 2016, reiterated that, indeed, the outcome of Civil Appeal No. 89 of 2011 was that the Court of Appeal granted an order of Mandamus compelling Kenya Sugar Board to hear and determine the application for a licence by Butali Sugar Mills Ltd dated 10 April 2010 within a reasonable time and in accordance with the law, by according the 1st Defendant an opportunity to be heard in opposition. Counsel for the 2nd Defendant further confirmed that the Plaintiff was registered as a sugar miller in 2005 and that, like all other millers, it had to seek and obtain a milling licence on an annual basis to enable it undertake the milling of sugar. It was also confirmed that the 1st Defendant did file Nairobi Judicial Review Application No. 1127 of 2005 which was withdrawn by consent following an agreement between the Defendants herein; and that in that matter, the 1st Defendant had made an unequivocal undertaking to compensate the Plaintiff in damages in respect of the interim orders that were made therein.

[15] Thus the 2nd Defendant was in no doubt that this suit relates specifically to the damages incurred by the Plaintiff as a result of the interim orders of injunction issued in Judicial Review Application No. 1127 of 2005; and it was its submission that the issues at hand need to be determined and certain facts need to be ascertained in a full trial and as such, the objection raised is not a valid Preliminary Objection at law. Counsel for the 2nd Defendant similarly urged for the dismissal of the Preliminary Objection on the authority of Mukisa Biscuit Manufacturing Co. Ltd vs. West End Distributors Ltd (supra). Both the Plaintiff and the 1st Defendant filed additional submissions in reply; which in the main, comprise a reiteration of their respective positions.

[16] Having considered the submissions filed herein, including the oral highlights thereof that were made on 22 February 2017, the issue for determination is whether the 1st Defendant's Preliminary Objection dated 22 April 2016 is meritorious. First and foremost, I have perused the Judgment of the Court of Appeal in Kisumu Civil Appeal No. 89 of 2011 in its entirety, and note that, contrary to the 1st Defendant's contention that the Court of Appeal declared the Plaintiff's licence to operate a sugar mill null and void, paragraph 43 thereof reads as follows:

"For the above reasons we allow both appeals, set aside the orders of 12th November, 2010 and 30th November 2010 respectively. In place of the order of the order of mandamus compelling Kenya Sugar Board to issue an operating licence, we grant ant order of mandamus compelling Kenya Sugar Board to hear and determine the application for a licence by butali Sugar Mills Limited dated 10th April 2010 within a reasonable time and according to the law giving the appellant a right to be heard in opposition."

[17] Accordingly, it is plain that the Preliminary Objection was based on a misrepresentation; and that would be sufficient to dispose of it. Secondly, it is noteworthy that what the 1st Defendant sought was not the striking out of this suit but its stay pending the hearing and determination of HCCC No. 206 of 2010, which is in connection with the Agreement between the Defendants dated 21 July 2006,and which was filed long after the Judicial Review application had been withdrawn. Again, it can be seen that the Preliminary Objection was not well taken, for it is a cardinal principle that a Preliminary Objection is taken with a view of disposing of the entire dispute on some point of law.

[18]What the 1st Defendant did was not to rely on some point of law, but on pure facts most of which have been disputed not only by the Plaintiff but also by the 2nd Defendant. Issues of fact have been raised by the 1st Defendant in its written submissions that touch on the facts of the following cases:

[a] High Court Miscellaneous Civil Application No. 1127 of 2005;

[b] High Court Civil Case No. 206 of 2010;

[c] Kisumu Civil Appeal No. 89 of 2011

[d] Kakamega High Court Constitutional Petition No. 26 of 2014

[19] Accordingly, they are not matters that are proper subjects of a preliminary objection as they require proof and testing in the usual manner at a trial to enable the Court make a determination one way or the other. Indeed in the case of Mukisa Biscuits Manufacturing Co. Ltd Vs. Westend Distributors (supra), the court held that:

"A preliminary objection is in the nature of what used to be a demurrer. It raises a pure point of law which is argued on the assumption that all the facts pleaded by the other side are correct. It cannot be raised if any fact is to be ascertained or if what is sought is the exercise of judicial discretion." Per Charles Newbold, P)

[20] The same principle was restated by Ojwang J, (as he then was) in Oraro vs. Mbaja [2005] eKLR thus:

"...A preliminary objection as correctly understood is now well settled. It is identified as, and declared to be the point of law which must not be blurred with factual details liable to be contested and in any event, to be proved through the processes of evidence. Any assertion which claims to be a preliminary objection, and yet it bears factual aspects calling for proof, or seeks to adduce evidence for its authentication, is not, as a matter of legal principle, a true preliminary objection which the court should allow to proceed. I am in agreement that where a court need to investigate facts, a matter cannot beraised as a preliminary point."

[21]The foregoing being my view of the matter, I would dismiss the 1st Defendants Preliminary Objection dated 22 April 2016 with costs, and direct the parties to proceed with the suit to hearing and disposal on the merits.

Orders accordingly.

DATED, SIGNED AND DELIVERED AT NAIROBI THIS 15TH SEPTEMBER, 2017

OLGA SEWE

JUDGE