[2024] KEHC 15717 (KLR)

Jianfeng & another v Jianping & another (Commercial Appeal E035 of 2024) [2024] KEHC 15717 (KLR) (Commercial and Tax) (13 December 2024) (Judgment)

Neutral citation: [2024] KEHC 15717 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Commercial Courts)

Commercial and Tax

Commercial Appeal E035 of 2024

BM Musyoki, J

December 13, 2024

Between

Xiao Jianfeng

1st Appellant

He Jianfeng

2nd Appellant

and

Zhang Jianping

1st Respondent

Brothers Manufacturing Limited

2nd Respondent

(Being an appeal from ruling and orders in the Chief Magistrate’s Court at milimani commercial courts commercial suit number E859 of 2023 dated 6-02-2024)

Judgment

1. The appellants filed civil suit number E859 of 2023 in the Chief Magistrate’s Court at milimani commercial courts claiming judgment against the respondents as follows;a.Special damages of Kshs 11,466,700. 00. b.50% profit for 2021/2022 and 2022/2023. c.Audited.d.Kshs 3,000,000. 00 compensation.e.Costs of the suit.

2. The respondents do not seem to have entered appearance or filed a defence. Instead, the respondents filed a preliminary objection dated 16th November 2023 whose grounds stated as follows;1. That the suit herein is fatally defective and incurably defective in law as it offends the provisions of Section 5 of the Civil Procedure Act (Cap 21, Laws of Kenya) and the co-operation agreement which is the basis of the application dated 12th October 2023 and suit herein which co-operation agreement in its clause 2 of article of Dispute Resolution clearly envisages the institution of any suit in the event of any dispute relating to the aforesaid cooperation agreement in the People’s Court in the People’s Republic of China to wit; the P.R.C as is the instant case, thus ousting the jurisdiction of this Honourable Court to entertain the matter herein.2. That the suit herein should therefore be struck out with costs accordingly.

3. The trial court heard the preliminary objection and on 6-02-2024, it upheld the objection and struck out the suit with costs to the respondents. It is against this ruling that the appellants have brought this appeal in which they have raised two grounds viz;1. The honourable magistrate erred in law and in fact in allowing the respondents’ preliminary objection.2. The honourable magistrate erred in law and in fact in failing to appreciate the appellant’s submissions.

4. It is trite that an appellate court should conduct the appeal before it as a re-hearing where it should re-examine, re-evaluate and re-analyse the evidence produced be before the trial court and come to its own independent conclusion always reminding itself that it did not hear the witnesses or see their demeanour. In this matter, it is notable that there was no full hearing and the issue of hearing witnesses and seeing their demeanour does not arise. In the context of this matter, this court will reconsider the preliminary objection as if it were raised before it.

5. Section 5 of the Civil Procedure Act provides that;‘Any court shall, subject to the provisions herein contained, have jurisdiction to try all suits of a civil nature excepting suits of which its cognizance is either expressly or impliedly barred.’

1. If I understand the respondent’s argument, their position is that the agreement dated 26-10-2021 barred the court from entertaining the matter. The agreement appears on pages 11 to 19 of the record of appeal. The agreement has what the parties referred to as article 9 which was the basis of the preliminary objection. The said article had two clauses which stated that;1. Disputes arising from the performance of this contract shall be settled on the principle of friendly negotiations.2. If the two parties fail to reach an agreement through consultation, they may file a lawsuit with the people’s court in accordance with the law.

6. I have had to read the above clauses more than three times to reassure myself that I was reading the same document being referred to by the parties. I am writing this judgment on the basis of the record of appeal filed by the appellant which I believe reflects the contents of the trial court’s file. My pain of reading through the agreement three times was caused by my failure to see reference to what the parties are referring to as the People’s Court of the People’s Republic of China. The clauses produced above do not contain such reference and were it not for the repeated reference to the said People’s Court of the People’s Republic of China in the parties’ submissions, I would have ended this judgement here by holding that the court erred in finding that the agreement made reference to the said courts as the same appears nowhere in the agreement.

7. I have read the ruling of the trial court and the submissions of the parties and I have had no difficult in understanding that the point of contention is whether the courts in Kenya could assume jurisdiction in matters where the parties had made an agreement to file their cases in foreign jurisdictions. On this issue, the honourable magistrate held that ‘the parties hereto have voluntarily subjected themselves to their preferred forum for dispute resolution and it has been held that courts cannot rewrite a contract that parties have willingly entered into’. The question I think I should answer in disposing this appeal is whether the Kenyan courts can assume jurisdiction in agreements where the parties have agreed to settle their disputes in a foreign jurisdiction.

8. It is not disputed that the agreement was done in Kenya. The contract was to be performed in Kenya and all the parties are described as residing in Kenya. Jurisdiction of our court are conferred by the Constitution or statute. The parties in this matter while performing and discharging the terms of the contract were definitely governed by the laws of Kenya. Sections 11 to 14 of the Civil Procedure Act Chapter 21 of the Laws of Kenya makes provision on where a suit may be filed and it is clear to me that this matter fitted in being filed in the trial court save for the exclusive jurisdiction clause the respondents raised.

9. The appellant has in my opinion misapprehended the provisions of Section 5 of the Civil Procedure Act. That Section confers jurisdiction on the courts unless where the same is barred. Jurisdiction is not granted by the parties and the parties cannot bar a court from exercising a jurisdiction conferred by the law. All they can do to avoid the court system is to subject themselves to arbitration or as in this matter choose the jurisdiction where they prefer their disputes be resolved but that choice is still amenable to disturbance by the courts where the circumstances demand so.

10. It will an abuse of our constitutional democracy and the laws to allow parties to walk into the country, register companies in the country, do business in the country with resources generated from the country and workforce and benefit of its laws, hospitality and process then completely lock out the courts of the same country with the courts having no powers or mandate to assume jurisdiction in whatever circumstances.

11. This is not the first case with similar issues. The courts in our country have had to deal with the exclusive jurisdiction clauses and they have established that the Kenyan courts can assume jurisdiction depending on circumstances and merits of the reasons given for such proposition. The appellants have referred me to United India Insurance Co. Ltd v East African Underwriters Ltd (1985) KLR 898, Valentine Investment Company (MSA) Ltd v Federal Republic of Germany (2006) eKLR and Universal Pharmacy (K) Limited v Pacific International Lines (PTE) Limited & Another (2015) eKLR all of which speak to the same issue of exclusive jurisdiction clauses. The common ground in these authorities is that the Kenya Courts have discretion to assume jurisdiction over cases whose subject matter is a contract which contains a clause conferring jurisdiction to a foreign court.

12. I have also sought guidance on the sound holding of Honourable Justice Stella Ruto in Sang v Ceva Logistics Limited & Another (2022) KEELRC 3777 (KLR) where she held that;‘It is trite that courts cannot re-write contracts between the parties. That said, it is not automatic that the existence of an exclusive foreign jurisdiction clause in a contract ousts the jurisdiction of the Kenyan courts. Such was the position taken by the Court of Appeal in the case of United India Insurance Co. (Kenya) Ltd vs Eats Africa Underwriters (Kenya) (1985) KLR 898, where Madan JA, found that despite the existence of an exclusive foreign jurisdiction clause in a contract, Kenya Courts would assume jurisdiction when the case is filed in Kenya.’

13. In the authority cited by the Honourable Judge which the appellants have also cited, the court set the criteria for determining whether the Kenyan courts could assume jurisdiction as follows;a.In what country the evidence on the issue of facts is situated, or more readily available, and of the effect of that on the relative convenience and expence of trial as between the court of the country and the court of the foreign country.b.Whether the law of the foreign court applies, and if so, whether it differs from the law of the country in any material respects.c.With what country either party is connected, and how closely.d.Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantage.e.Whether the plaintiffs would be prejudiced by having to sue in the foreign court because they would be deprived of security for their claim, be unbale to enforce any judgment obtained, be faced with a time bar not applicable in their country.

14. I am convinced that this is a good case for Kenyan courts to assume jurisdiction. The parties have been described as residing in Nairobi; the amount claimed may be gobbled up by costs of travelling to China to prosecute the suit; the parties were supposedly trading in Kenya and most likely witnesses are in Kenya and obviously the parties’ business was regulated by the Kenyan laws and procedures. The respondents have not put out a case why the parties especially the appellants should suffer the inconveniences of suing in China and I am in the circumstances of the view that the respondents are seeking to take procedural advantage.

15. I hold and find that the court had the requisite jurisdiction to entertain the matter and could assume jurisdiction if the circumstances allowed. Article 48 of the Constitution dictates that the state shall ensure access to justice to all persons. Requiring that the appellants should file their case in China when prosecuting the same would be inhibiting in terms of costs, convenience and other logistics would be a violation of this constitutional right.

16. According to the magistrate, the parties had chosen their forums of settlement of disputes. However, the principle that parties are free to choose alternative forums, it is not the same as preferring jurisdiction of the foreign court in priority to the Kenyan courts. The magistrate misdirected herself when she delved into the matter as if the forum chosen was an alternative dispute resolution mechanism such as arbitration, mediation and reconciliation. If the clauses in the agreement had chosen arbitration, the court would have been justified in declining jurisdiction, but even then, not to the extent of striking out the suit. The law allows the court on an application of the defendant after entering appearance to stay the proceedings pending arbitration and not striking out the suit.

17. In view of the above, I have no difficult in holding that the trial court had jurisdiction to determine the matter and it was justifiable that it assumed jurisdiction despite the exclusive jurisdiction clause in the parties’ agreement. Consequently, this appeal is allowed and I proceed to make the following orders;1. The ruling of the trial court dated 6-02-2024 is hereby set aside.2. Commercial suit number E859 in the Chief Magistrate’s Court at Milimani Commercial Courts is hereby reinstated and the same shall proceed on its merits before a magistrate other than Honourable Lucy Ambasi CM.3. The appellant is awarded the costs of this appeal.

DATED SIGNED AND DELIVERED AT NAIROBI THIS 13TH DAY OF DECEMBER 2024. B.M. MUSYOKIJUDGE OF THE HIGH COURT.Judgment delivered in presence of Mr. Muia for the respondents and Mr. Ojienda for the appellant.