[2022] KEHC 16817 (KLR)

Pabari Investments Limited v Absa Bank Mauritius Limited (Commercial Case 1 of 2021) [2022] KEHC 16817 (KLR) (16 December 2022) (Ruling)

Neutral citation: [2022] KEHC 16817 (KLR)

Republic of Kenya

In the High Court at Mombasa

Commercial Case 1 of 2021

OA Sewe, J

December 16, 2022

Between

Pabari Investments Limited

Plaintiff

and

Absa Bank Mauritius Limited

Defendant

Ruling

1. The brief background of this matter is that the plaintiff filed this suit against the defendant vide the Plaint dated 26th January 2021. Concomitantly, the plaintiff filed a Notice of Motion dated 26th January 2021 seeking, inter alia, leave to serve Summons to Enter Appearance and pleadings upon the defendant; a company domiciled in Mauritius. The Notice of Motion was, in the first instance, heard ex parteand leave granted as prayed. The Court also granted the plaintiff a temporary injunction restraining the defendant from instituting or in any way prosecuting any liquidation petition against the plaintiff pursuant to the Statutory Notice dated 4th June 2020 or any other statutory notice whatsoever, pending the inter partes hearing and determination of the application.

2. Upon being served with process, the defendant filed its Replying Affidavit on 11th February 2021 in opposition to the application. Thereafter on 1st April 2021, the defendant filed the Notice of Motion dated 8th March 2021 (which Motion is the subject of this ruling) seeking that:(a)The Court be pleased to set aside its order issued on 27th January 2021 granting the plaintiff leave to serve Summons to Enter Appearance upon the defendant outside its jurisdiction;(b)In the alternative to prayer [b] above, the Court be pleased to strike out prayers [a], [b] and [c] of the Plaint dated 26th January 2021;(c)The costs of the application be in the cause.

3. The application was filed under Sections 1A, 1B, 3, 3A of the Civil Procedure Act as well as Order 5 Rule 21 and Order 51 of the Civil Procedure Rules. It was premised on the grounds that, notwithstanding that the Court by its order dated 27th January 2021 assumed jurisdiction in this matter and granted leave for service of summons on the defendant outside jurisdiction, the defendant is still entitled to challenge the jurisdiction of the Court. It was further the contention of the defendant that the Court has no jurisdiction with respect to the subject matter of this suit on account of the jurisdiction clauses embedded in the Facility Agreement entered into between the parties on 26th February 2018 (the Facility Agreement) as well as the Transaction and Settlement Agreement dated 9th April 2019 (the Settlement Agreement).

4. The plaintiff’s response to the application dated 8th March 2021 was by way of a Notice of Preliminary Objection dated 21st March 2022. It thereby indicated that it would seek the striking out of the said application on the following points:(a)Whether leave to serve summons on the defendant was properly granted was considered in paragraphs 33, 34 and 35 of the ruling delivered on 19th August 2021;(b)Whether the High Court has jurisdiction in light of the choice of law and exclusive jurisdiction clauses was considered in paragraphs 36, 37 and 38 of the ruling delivered on 19th August 2021;(c)In the light of the above, the Court is precluded by Section 7 of the Civil Procedure Act, Chapter 21 of the Laws of Kenya and Article 165(6) of the Constitution from considering the issues afresh;(d)Without prejudice to the above, even if the issues were to be considered again, the High Court in fact has jurisdiction given the pleaded cause of action, the wording of the relevant contracts and the defendant’s conduct in the matter.

5. Upon directions being given on the 24th March 2022 that both the application and the plaintiff’s Preliminary Objection be canvassed simultaneously by way of written submissions, Mr. Ndungu, learned counsel for the defendant, filed his written submissions on 7th July 2022. His basic argument was that the defendant was not given an opportunity to address the Court before leave to serve summons outside jurisdiction was made. He therefore proposed the following issues for determination:(a)Whether the plaintiff’s Preliminary Objection is merited;(b)Whether the Court ought to set aside the ex parte orders issued herein for leave to serve summons on the defendant outside jurisdiction;(c)Whether the Court should strike out prayers [a], [b] and [c] in the Plaint.

6. Mr. Ndungu submitted that, the defendant always maintained the right to contest the ex parte orders; and that it was in that spirit that it filed the instant application. He relied on Roberta Macclendon Fonville v James Otis Kelly III & Others[2002]eKLR, in which it was held that assumption of jurisdiction is only provisional; and that a defendant served with summons has a right to thereafter contest the jurisdiction of the Court. He pointed out that, in so far as the Court considered the issue of leave “spent”, it follows that the same was not given a merit consideration in the ruling dated 26th July 2021. Counsel cited A N M v P M N [2016] eKLR for the proposition that for a matter to be res judicata, the issues therein must have been determined on merits by a court of competent jurisdiction.

7. Mr. Ndungu further submitted, on the authority of CMC Holdings Ltd v James Mumo Nzioki [2004] eKLR, that the Court has the discretion to set aside the impugned ex parte order, so as to ensure that the defendant does not suffer injustice or hardship of any sort. He added that it is a cardinal principle of natural justice that no man should be condemned unheard and urged the Court to set aside theex parte orders on that account.

8. Mr. Ndungu also faulted the Court for granting leave when it had no jurisdiction to entertain the dispute. He pointed out that, from a cursory review of the Plaint, it can be seen that the plaintiff did not simply seek injunctive orders, but also asked for declaratory orders in respect of its contractual relationship with the defendant. According to him, nothing in Order 5 Rule 21 of theCivil Procedure Rules permits a party to file a suit in Kenya or seek leave to serve a party out of jurisdiction where the cause of action is for an injunction to restrain the defendant from commencing liquidation proceedings. He relied on Republic v Senior Resident Magistrate, Mombasa ex parte H L & Another [2016] eKLR and Law Society of Kenya v Martin Day & 3 Others [2015] eKLR to buttress his argument that leave to serve summons out of jurisdiction ought not to have been granted by the Court in the first place. For good measure, Mr. Ndungu referred the Court to the following authorities on jurisdiction:(a)Owners of the Motor Vessel “Lillian S” v Caltex Oil (Kenya) Ltd [1989] KLR 1;(b)Samuel Kamau Macharia & Another v Kenya Commercial Bank & 2 Others [2012] eKLR;(c)John Russel And Company Ltd v Cayzer Irvine and Company Ltd [1916] 2 AC 298.

9. In the alternative, Mr. Ndungu submitted that, should the Court find that the orders for leave were properly granted, then it should proceed to strike out prayers [a], [b] and [c] of the Plaint, since they are independent of the prayer for injunction as sought in paragraph [d] thereof. This argument was hinged on the fact that the defendant is a foreign entity; and therefore any orders based on the first three prayers would be ineffectual and incapable of enforcement in any other jurisdiction.

10. In this regard, Mr. Ndungu relied on Indian And General Investment v Sri Ramchandra Mardaraja Deo, AIR 1952 Cal 508 for the proposition that a judgment founded on an erroneous assumption of jurisdiction will lack international validity and will therefore be incapable of enforcement. He consequently prayed that the plaintiff’s Preliminary Objection be dismissed, and that the defendant’s application dated 8th March 2021 be allowed with costs as prayed therein.

11. On his part, Mr. Kongere, counsel for the plaintiff, relied on his written submissions filed on 14th September 2022. He agreed with Mr. Ndungu on the three issues for determination, namely, whether the application is res judicata; whether the Court has jurisdiction over the defendant; and whether Prayers [a], [b] and [c] in the Plaint dated 26th January 2021 should be struck out. While conceding that the defendant retains the right to challenge the leave granted herein, Mr. Kongere submitted that, once an unsuccessful challenge is made, a subsequent challenge cannot lie. He pointed out that both parties addressed the issue of jurisdiction in their submissions which the Court took into account in the ruling dated 19th August 2021. He added that, since an appeal has in fact been filed from the said ruling it would be improper to ask another Judge to revisit the issue.

12. As to whether leave was in fact properly granted, given the plaintiff’s prayers, Mr. Kongere took the view that Order 5 Rule 21 of the Civil Procedure Rulescontemplates a plurality of reliefs within the same suit, in so far as it indicates that, in addition to injunction, it is permissible for a party to seek damages and still obtain leave. In his view, the defendant’s argument would have the undesirable effect of piecemeal litigation, which would be at odds with the principle in Kenfit Limited v Consolata Fathers [2015] eKLR that a party cannot litigate in instalments over the same subject matter.

13. In response to the defendant’s submissions in connection with prayers [a], [b] and [c] of the Plaint and whether the same should be struck out in limine, Mr. Kongere submitted that the prayer for injunction is so closely intertwined with the other prayers as to be inseparable. In his view, to consider whether or not to grant the injunction, the Court will inevitably be required to consider the contracts. He also submitted that an exclusive jurisdiction clause does not necessarily oust the jurisdiction of Kenyan courts. Counsel gave the example of Evergrine Marine (Singapore) PTE Limited & Another v Petra Development Services Ltd[2016] eKLR in which jurisdiction was assumed notwithstanding the existence of an exclusive jurisdiction clause. He therefore concluded his submissions by urging the Court to strike out the defendant’s application for beingres judicata; or in the alternative to dismiss it with costs for lacking merit.

14. I have given due consideration to the application, the grounds set out in the plaintiff’s Preliminary Objection dated 21st March 2022 as well as the submissions by counsel for the parties. The key issues arising therefrom, as correctly suggested by learned counsel, are:(a)Whether or not the application dated 8th March 2021 is res judicata; and,(b)Whether prayers [a], [b] and [c] in the Plaint dated 26th January 2021 ought to be struck out in any event. (a) On Res Judicata: 15. The doctrine of res judicata is set out in Section 7 of the Civil Procedure Act. It ousts the jurisdiction of a court to try any suit or issue which has been finally determined by a court of competent jurisdiction in a former suit involving the same parties or parties litigating under the same title. Thus, Section 7 states:“No Court shall try any suit or issue in which the matter in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title…and has been heard and finally decided by such Court.”

16. Accordingly, in Kenya Commercial Bank Limited v Muiri Coffee Estate Limited & Another [2016] eKLR, the Supreme Court held: -“[52]Res judicata is a doctrine of substantive law, its essence being that once the legal rights of parties have been judicially determined, such edict stands as a conclusive statement as to those rights. It would appear that the doctrine of res judicata is to apply in respect of matters of all categories, including issues of constitutional rights……..(58)Hence, whenever the question of res judicata is raised, a Court will look at the decision claimed to have settled the issues in question; the entire pleadings and record of that previous case; and the instant case to ascertain the issues determined in the previous case, and whether these are the same in the subsequent case. The Court should ascertain whether the parties are the same, or are litigating under the same title; and whether the previous case was determined by a Court of competent jurisdiction….”

17. The same court in the case of John Florence Maritime Services Limited & another v Cabinet Secretary Transport & Infrastructure & 3 others (Petition 17 of 2015) [2021] KESC39 (KLR) (Civ) (6 August 2021) (Judgment), stated that: -“[59]For res judicata to be invoked in a civil matter the following elements must be demonstrated:a)There is a former Judgment or order which was final;b)The Judgment or order was on merit;c)The Judgment or order was rendered by a court having jurisdiction over the subject matter and the parties; andd)There must be between the first and the second action identical parties, subject matter and cause of action.(See Uhuru Highway Developers Limited v Central Bank of Kenya & others [1999] eKLR and See the decision of the Court of Appeal in Nicholas Njeru v Attorney General & 8 othersCivil Appeal 110 of 2011 (2013) eKLR)…”

18. Needless to mention that the doctrine of res judicata is as applicable to main suits as it is to interlocutory applications. This point was made thus by the Court of Appeal in Uhuru Highway Development Ltd v Central Bank of Kenya & 2 Others) Civil Appeal No. 36 of 1996):“There is not one case cited to show that an application in a suit once decided by courts of competent jurisdiction can be filed once again for rehearing. This shows only one intention on the part of the legislature in India and our Civil Procedure Act. That is to say, there must be an end to applications of a similar nature; that is to say further, wider principles of res judicata apply to applications within the suit. If that was not the intention we can imagine that the courts could and would be inundated by new applications filed after the original one was dismissed. There must be an end to interlocutory applications as much as there ought to be an end to litigation..."

19. With the foregoing in mind, I have looked at the pleadings and proceedings held to date. The parties are in agreement that the defendant is a limited liability company registered as such and offering banking services in Mauritius. It is for that reason that leave was granted to the plaintiff on 27th January 2021 pursuant to Order 5 Rule 21 of the Civil Procedure Rules for service of Summons to Enter Appearance and pleadings outside jurisdiction.

20. The aforementioned provision presupposes that such leave be grantedex parte, so as to open the way for service of Summons and pleadings. Accordingly, in Misnak International (UK) Limited v 4MB Mining Limited C/O Ministry of Mining, Juba Republic of South Sudan & 3 others [2019] eKLR, the Court of Appeal explained that:“...upon such leave being granted, the summons has to be served upon such a defendant. It is only upon such service of the summons that a court assumes jurisdiction over a foreign defendant and not a moment sooner. This Court in Raytheon Aircraft Credit Corporation & Another vs Air Al-Faraj Limited (supra) appreciated as much by stating that –“The High Court assumes jurisdiction over persons outside Kenya by giving leave, on application by a plaintiff to serve summons or notice of summons, as the case may be, outside the country …. after such summons are served in accordance with the machinery stipulated therein.”

21. That such assumption is only provisional and can be challenged thereafter is not in contention. I therefore agree with the position taken in Roberta Macclendon Fonville v James Otis Kelly III & Others [2002]eKLR, in which it was held that assumption of jurisdiction in such circumstances is only provisional; and that a defendant served with summons has a right to contest the jurisdiction of the Court. Hence, while the defendant now seeks to mount that challenge via the instant application, the plaintiff is of the posturing that the application is res judicata from the standpoint of the ruling dated 26th July 2021.

22. A perusal of the court record confirms that the application dated 26th January 2021 was fixed for hearing inter partes; and that in response thereto, the defendant filed a Replying Affidavit sworn on 9th February, 2021 by its Business Support Manager, Arasi Arnassalon Nallan. It is manifest from that affidavit that the issue of jurisdiction was addressed at length by the defendant. In particular, the defendant asserted thereby that:“…this Court does not have the jurisdiction to order the service of summons out of Kenya in this suit as the subject matter of the present proceedings is not one of those provided under Order 5 Rule 21 of the Civil Procedure Rules.”

23. Further, the defendant averred, at paragraph 8 of the said Replying Affidavit that:“…the Court does not have the jurisdiction to order for service of summons outside Kenya where the plaintiff seeks an injunction to restrain a defendant from commencing liquidation proceedings.”

24. I have likewise perused the submissions filed on behalf of the parties by their respective advocates; and noted in particular that in the defendant’s submissions dated 9th April, 2021, the question of the court’s jurisdiction under Order 5 Rule 21 of the Civil Procedure Rules was extensively discussed at paragraphs 13-24. The proceedings of court on the 20th April, 2021 also reveal that Mr. Ndungu, counsel for the defendant, had an opportunity to highlight his written submissions and in the process reiterated his arguments in connection with Order 5 Rule 21 of the Civil Procedure Rules.

25. Thereafter, the Court (Hon. Chepkwony, J.) had the opportunity to consider all those arguments, including the significance of the “exclusive jurisdiction” clauses in the ruling dated 26th July 2021, at paragraphs 33-38, before coming to the conclusion that jurisdiction had been properly assumed. At paragraph 38, Hon. Chepkwony, J. held:“In my view, the circumstances of this case are peculiar in that it is the Defendant who initiated the litigation in Kenya while still alive to the jurisdiction clause or the “forum selection”clause. As such, it is my humble view that the Defendant qualified the clause once it filed pleadings in the Kenyan court and the Plaintiff could respond thereto or initiate a pertinent claim against the Defendant before the Kenyan courts. Better still, it is the view of this court that the Defendant waived its right to invoke the Jurisdiction clause once it instituted proceedings before the Kenyan courts. Similarly, this ground of objection fails.”

26. In the premises, it is plain to me that the instant application is indeed res judicata; a final decision having been made on the issue of jurisdiction in all its manifestations herein by a court of competent jurisdiction in this same suit. It is therefore apposite to echo the decision of the Court of Appeal in Joseph Ndirangu Waweru t/a Mooreland Mercantile Co. & another v City Council of Nairobi[2015] eKLR that: -“…a Judge has no jurisdiction to re-hear and interfere with a decision in a matter that was decided by a fellow Judge of concurrent jurisdiction. If the respondent was aggrieved by the ruling and preliminary decree, its recourse was in appealing against the same…”

27. I therefore find merit in the plaintiff’s Preliminary Objection dated 21st March, 2022. Indeed, the court record confirms that the defendant appealed the ruling dated 26th July 2021. The Notice of Appeal dated 11th August 2021 was lodged herein on 12th August 2021. Having taken that route, which in the circumstances was the proper course for the defendant to take, it was pointless filing the instant application.

(b) On whether the court should strike out prayers (a), (b) and (c) of the Plaint dated 26th January, 2021: 28. In its application dated 8th March 2021, the defendant prayed, in the alternative, that the Court be pleased to strike out prayers [a], [b] and [c] of the Plaint dated 26th January 2021, contending that they are independent of prayer [d] by which the plaintiff prayed for a permanent injunction. The Defendant has maintained that this court has no jurisdiction to hear and determine those prayers in relation to a foreign defendant, granted the strictures of Order 5 Rule 21 (e) of the Rules. Counsel further submitted that such are orders that may ultimately be unenforceable because they lack international validity.

29. As has been pointed out herein above, this argument was premised on the fact that the defendant is a foreign entity; and therefore any orders based on the first three prayers would be ineffectual and incapable of enforcement in any other jurisdiction. The case of Indian and General Investment v Sri Ramchandra Mardaraja Deo, AIR 1952 Cal 508 was cited by Mr. Ndungu to augment his argument that a judgment founded on an erroneous assumption of jurisdiction will ultimately be ineffectual.

30. However, having upheld the plaintiff’s Preliminary Objection on the ground of jurisdiction, it follows that the very foundation for the defendant’s alternative prayer has been demolished. While it is noteworthy that Mr. Kongere endeavoured to demonstrate that Order 5 Rule 21 of the Civil Procedure Rules contemplates a plurality of reliefs within the same suit, in so far as it indicates that, in addition to injunction, it was permissible for the plaintiff to seek damages and still obtain leave if it sought an injunction as well, in my view, the propriety of the reliefs sought herein would best be considered at the hearing, if this suit gets to that stage. It would therefore be premature to strike out the plaintiff’s prayers at this point in time. The guidance by the Court of Appeal in Yaya Towers Limited v Trade Bank Limited (In Liquidation) [2000] eKLR is that: -“…A plaintiff is entitled to pursue a claim in our Courts however implausible and however improbable his chances of success. Unless the defendant can demonstrate shortly and conclusively that the plaintiff’s claim is bound to fail or is otherwise objectionable as an abuse of the process of the court, it must be allowed to proceed to trial.”

31. In the result, the defendant’s application dated 8th March 2021 is hereby struck out with costs for being res judicata.It is ordered.

DATED, SIGNED AND DELIVERED VIRTUALLY AT MOMBASA THIS 16TH DAY OF DECEMBER, 2022. OLGA SEWEJUDGE