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JudgmentPETER OKOTH OKOMBO VS SUKARI INDUSTRIES LIMITED11 min read

PETER OKOTH OKOMBO VS SUKARI INDUSTRIES LIMITED

High Court at Migori High Court · · Anne Ong'injo


Background

  1. By a plaint filed in Court on 24th March, 2023 the appellant sought for the following prayers against the Respondent;
  2. The value of the unharvested sugar cane.
  3. Costs of this suit.
  4. Interest on (b) and (c) above at court’s rate.
  5. The basis of the claim before the trial court as pleaded by the appellant is that on or about the 20th June, 2011, the Appellant/Plaintiff and the Respondent/Defendant entered into an agreement/contract whereby the Appellant/Plaintiff was to cultivate/develop sugarcane on Plot No.216 and by the terms of the said contract/agreement, the Defendant was to purchase/harvest the sugar cane on maturity and pay the Plaintiff the value thereof.
  6. The appellant pleaded that pursuant to the said contract/agreement, the Plaintiff developed sugarcane on the said Plot No. 216 measuring approximately 0.8 Ha and on its maturity asked the Respondent/Defendant to harvest/purchase the said sugarcane as per the agreement, but the Defendant unreasonably and in breach of the contract refused or failed to harvest Plant Crop, Ratoon 1 and Ratoon 2 thereby occasioning serious losses to the Appellant/Plaintiff.
  7. The Appellant pleaded particulars of breach as follows;
  8. Failing and/or neglecting to harvest the plant crop, 1st and 2nd ratoons.
  9. Deliberately and recklessly refusing to give consent to the Plaintiff to dispose of the developed sugarcane to 3rd parties or the open market.
  10. As a result of the said breach of contract, the Appellant/Plaintiff lost approximately 240 tons for the three crop cycles and he avers that the prevailing price at the time of maturity of the sugar cane was Kshs 3,800/=.
  11. The Appellant/plaintiff stated that as a result of the Respondent/Defendant’s breach of contract, the Plaintiff suffered loss which he looks upon the Defendant for compensation.
  12. In response, the Respondent/Defendant filed its defence dated 27th April, 2022 before the trial court on 28th April, 2022. In the said defence the Respondent denied the contents of the plaint and alleged fraud on the part of the Appellant. The particulars of fraud were set out as follows;
  13. Concocting purported sugarcane farming and supply contract between the plaintiff and the Defendant that never was.
  14. Forging the signature of the alleged Defendant’s representative to the purported contract.
  15. Forging and creating the Defendant’s rubber stamp and purporting to present it as the original Defendant’s stamp by affixing it to the purported contract.
  16. Forging and creating the Kakmasia Assistant Chief’s stamp and purporting to present it as original Assistant Chief’s stamp by affixing it to the purported contract. 
  17. Forging the Chief’s and Assistant Chief’s signature.
  18. Imputing that the Kamkasia Assistant Chief attested to the Contract when he did not.
  19. Presenting to court forged documents to be awarded damages and monetary gains.
  20. The Respondent/Defendant cited Sections 4, 27, 28, 29 and 30 of the Limitation of Actions Act, Cap 22 that the court lacked jurisdiction to grant leave to file a suit founded on contract and barred by limitation of time. 
  21. The Respondent/Defendant asked the trial court to dismiss the Plaintiff’s suit with costs.
  22. Upon hearing parties herein the trial magistrate found that there was a contract between the parties for supply of sugarcane as per Exhibit No. 2 but in consideration of the arbitration in Clause No. 6 of the contract the parties did not exhaust the internal dispute resolution in the contract and the lack of harvesting the cane crop and two ratoons should have been dealt with in arbitration rather than the court.  Clause 6 of the contract provides:-

“All questions, disputes or difference which at any time hereafter arise between the parties hereto touching or concerning this Agreement on the constructions hereof or as to the rights, duties and obligations of either party hereto as to any other matter shall be referred to a local Arbitration committee of five people compromising: -

a) the district office in whose area the land on which the cane supply contract relates is situated;

b) One person representing the Kenya Sugar Board;

c) One nominee of the miller;

d) One nominee of the grower and;

e) the Divisional Agricultural officer of the area where the cane in question is situated or in his absence an agricultural officer holding the rank of Divisional Agricultural Officer or above appointed by the area District Agricultural Officer for that purpose.

6.1  The District Officer shall preside over the meeting of this Arbitration committee

6.2 The Arbitration Committee shall have powers  to receive evidence from any source including summoning witnesses to testify before it and will have all the powers  conferred on arbitrations by the Arbitration Act or any statutory Legislation thereof  for the time being in force in Kenya.

6.3 Any party not satisfied with the decision of the Arbitration committee may refer the dispute to the Sugar Arbitration Tribunal established under Sugar Act, 2001 whose decision shall be final and binding on all the parties involved.”

  1. The trial magistrate said that the parties were bound by the arbitration clause in their contract and that the Appellant jumped  the gun by filing the suit in court.  The trial magistrate relied on the decision of Mrima J in Clement Nyandiro Onchonke vs Trans Mara Sugar company Ltd 2019 EKLR.  The Appellant suit was therefore dismissed for having been filed in court prematurely.

The Appeal

  1. The appellant being dissatisfied with the judgment and decree of the trial court preferred an appeal before this court vide a Memorandum of Appeal dated 31st July 2023 setting forth the following grounds of appeal;
  2. THAT the learned trial magistrate erred in law and in fact in dismissing the appellant’s suit for lack of jurisdiction on account of arbitration clause even after hearing the suit till the end.
  3. THAT the learned trial magistrate erred in law and in fact in dismissing the appellant’s suit for lack of jurisdiction on account of arbitration clause even when the Respondent filed its memorandum of appearance together with Statement of Defence in which it admitted jurisdiction of the Honourable court.
  4. THAT the learned trial magistrate erred in law and in fact in dismissing the appellant’s suit for lack of jurisdiction on account of arbitration clause even when the Respondent waived its right to take recourse to arbitration.
  5. THAT the learned trial magistrate grossly misdirected herself in disregarding the fact that the Arbitration clause was inoperative thus consequently arriving at a wrong conclusion.
  6. THAT the learned trial magistrate grossly misdirected herself in principle on the law regarding arbitration thus consequently coming to a wrong conclusion.
  7. THAT the learned trial magistrate erred in law and in fact regarding the law of arbitration thus consequently coming to a wrong conclusion.

Reasons wherefore the appellant prays for;

  1. This Honourable court do set aside the judgment of the Learned Trial Magistrate and allow the appellant’s appeal.
  2. This Honourable court do look at the main suit in substance.
  3. The appellant be awarded the costs of this appeal and of the lower court.
  4. On 12th June, 2024, this court issued directions that the appeal be disposed of by way of written submissions. The Appellant complied with the directions and in support of this appeal filed his written submissions dated 13th June, 2024. There are no submissions on record for the Respondent.

Appellant’s submissions

  1. The appellant submitted that the trial court dismissed the suit on grounds that it lacked jurisdiction since the matter had an Arbitration clause and ought to have been heard by Arbitration. The appellant relied on the case of Owners of the Motor vessel “Lillian S” vs Caltex Oil (Kenya) Ltd (1989) KLR 1.
  2. It was submitted by the appellant that the matter was heard to the end and judgment was delivered. It was a finding of the trial court that there was a valid contract between the parties evidenced by the contract book of serial no. 33177 issued by the respondent and which was produced and relied upon by the appellant.
  3. Clause 6 of the contract book provided for the Arbitration clause and it states:

“All questions, disputes or differences which at any time arise between the parties hereto touching or concerning this agreement or the constructions hereof, or as to the rights, duties and obligations of either party hereto or as to any matter shall be referred to a Local Arbitration Committee”.

  1. The appellant urge that the intention of the parties was to oust the jurisdiction of the court and have the dispute settled through arbitration. The appellant put reliance on Article 159 (2) (c) of the Constitution. The court has jurisdiction to substantially hear and determine a matter that is subject to arbitration if application for reference is not made together with filing conditional memorandum of appearance.
  2. It is well settled that the intention of the legislature is that if the agreement is inter alia inoperative, the forum with jurisdiction to hear and determine the matter is the court. The tenor and import of Article 159 (2) (c) of the Constitution together with Section 6(1) of the Arbitration Act is that where parties to a contract consensually agree on arbitration as their dispute resolution forum of choice, the courts are obliged to give effect to that agreement.
  3. It was the position of the appellant that in the instant appeal, no such application was made at all. In addition, the Respondent admitted the jurisdiction of the court in its statement of defence. The moment the Respondent filed memorandum of appearance without any protest on jurisdiction, the Arbitration clause became inoperative. The Respondent waived or rendered the arbitration clause breathless.
  4. The appellant urges this court to allow this appeal in terms of the prayers sought in the memorandum of appeal.
  5. The Respondents in their submissions dated 24.10.24 filed on even dates submitted that parties are bound by their contracts and the court cannot change the terms of the contract. The relied on the decisions of Court of Appeal National Bank of Kenya Ltd vs. Plastic Samkoli (K) Ltd (2002) 2 E. A. 503 (2011) EKLR as well as the holding in Kimaiyo Langat vs. Cooperative Bank of Kenya Ltd (2017). The Respondent maintained that the trial court lack jurisdiction to entertain the matter in the first instance in view of the arbitration clause and authorities relied upon.
  6. In respect to costs the Respondent argued that costs will follow the events unless the court for good reasons orders otherwise.  They argued that the Appeal be dismissed and the judgement of the trial court be upheld.

Analysis and Determination

  1. Having considered the grounds of appeal and the written submissions by counsel for the appellant and the Respondent,  I find the issue arising for determination in this appeal is whether the trial court lacks jurisdiction on account of the arbitration clause in the contract between the Appellant and the Respondent
  2. This being a first appeal this court has a duty to re-evaluate, re-analyze and re-assess the evidence adduced before the trial court and satisfy itself that the decision was well founded. This duty was set out in Selle & Another vs. Associated Motor Boat Co. Ltd & Others [1968] EA 123, as follows:

“This court is not bound necessarily to accept the findings of fact by the court below. An appeal to this court ... is by way of re-trial and the principles upon which this court acts in such an appeal are well settled. Briefly put they are that this court   must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect...”

  1. It is trite law that an appellate court will not interfere with a finding by the trial court unless it is established that such a finding was arrived at based on no evidence or the trial court acted on wrong legal principles of law in arriving at the decision (see Ephantus Mwangi and Another –vs- Duncan Mwangi Wambugu (1982) – 88) IKAR 278).
  2. Further the issues of jurisdiction is well settled in the Owners of the Motor Vessels “Lilian S” (supra) where Nyarangi J held that:-

“Jurisdiction is everything without it a court has no power to make one more step.  Where a court has no jurisdiction they will be no basis for a continuation of proceedings pending other evidence.  A court of law downs its tools in respect of matter before it the moment it holds the opinion that it is without jurisdiction.

  1. When the Appellant filed her suit on 19.4.22 she pleaded that the trial court had jurisdiction to hear and determine the suit. On filing the Memorandum of Appearance and statement of defence dated 26.4.2 the Respondent admitted jurisdiction of the court although a Notice of Preliminary Objection was also raised as to the jurisdiction of the trial court.
  2. A perusal of the trial court records does not show if the preliminary objection was heard. The trial magistrate proceeded to take the evidence of the Appellant and by an Application dated 29.9.22 was allowed in that the Respondents case was re-opened.
  3. Section 6 of the Arbitration Act of Cap 4 of 1995

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.”

  1. The Appellant elected to come to court inspite of the fact that the contract between her and the Respondent contained arbitration Clause.  When the Respondent filed their Memorandum of Appearance they concurrently filed statement of defence and preliminary objection as to jurisdiction but failed to prosecute the same. From provision of Section 6 the Respondent ought to have applied to have this matter referred for arbitration at the time they entered appearance and ought not to have filed a statement of defence. The act of filing the statement of defence in which they admitted the jurisdiction of the court and the fact that the Respondent participated in the proceedings upto conclusion meant that they waived their right to adjudicate their dispute before an arbitrator. They ought to have applied promptly and at the earliest stage of proceedings to have the matter in issue stayed so that the dispute could be referred to arbitration.   The fact that the trial court did not determine the preliminary objection as to jurisdiction and therefore failed to down its tools in respect of the matter before it, it was obliged to hear and determine the issues in question between the parties herein.
  2. In the circumstances of the above findings this court determines that the trial magistrate erred in dismissing the Appellants suit without establishing whether or not the contract between the parties was breached and whether the remedies prayed for accrued.  The Appeal is therefore allowed with costs to the Appellant.  This matter is remitted back to the trial magistrate to make appropriate orders in regard to the prayers sought by the Appellant.
  3. This judgment to apply in Nos, 54, 55, 56, 57 and 58 of 2023.

Delivered dated and signed at Migori this 31ST day of October,  2024.


    PETER OKOTH OKOMBO VS SUKARI INDUSTRIES LIMITED PETER OKOTH OKOMBO VS SUKARI INDUSTRIES LIMITED