Xiao Jianpeng AND He Jianfeng VS Zhang Jianping AND Brothers Manufacturing Limited

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT NAIROBI

(COMMERCIAL AND TAX DIVISION)

COMMERCIAL APPEAL NUMBER E035 OF 2024

XIAO JIANFENG……………..……………………………1^ST APPELLANT

HE JIANFENG……………………………………………..2^ND APPELLANT

-VERSUS-

ZHANG JIANPING……….....……………………………1^ST RESPONDENT

BROTHERS MANUFACTURING LIMITED……………2^ND 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

The appellants filed civil suit number E859 of 2023 in the Chief Magistrate’s Court at milimani commercial courts claiming judgment against the respondents follows;

1. Special damages of Kshs 11,466,700.00.
2. 50% profit for 2021/2022 and 2022/2023.
3. Audited.
4. Kshs 3,000,000.00 compensation.
5. Costs of the suit.

The respondents do not seem to have entered appearance or filed a defence. Instead, the respondents filed raised a preliminary objection dated 16^th 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 12^th 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.

The trial court heard the preliminary objection and on 6-02-2024 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 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.

It is trite that an appellate 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 lower 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 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.

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.’

If I understand the respondent’s argument, their position is that the agreement referred to barred the court from entertaining the matter. The agreement which was the subject of the suit was dated 26-10-2021. The same appears on pages 11 to 19 of the record of appeal. The agreement has what the parties referred to 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.

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 party. 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 China of the 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, 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.

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 parties can oust jurisdiction of the domestic courts in favour of foreign courts.

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. They could not be living in Kenya and at the same time subjecting regulation of their contractual relationship to foreign country.  Section 6 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.

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 other forms of alternative dispute resolution mechanism. Choosing to file suits in foreign courts is not an alternative dispute jurisdiction mechanism but giving priority or preference to the said foreign courts and legal system over the domestic courts which to me is an abhorrent to our laws.

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 our own laws, hospitality and process, then cede what I would call judicial sovereignty to another country regarding the same transaction or contract. This would in my view be tantamount to dereliction of the law which is not acceptable.

I hold and find that the court had the requisite jurisdiction to entertain the matter. Article 48 of the Constitution guarantees every person access to justice. Requiring that the appellant should file their case in China would be inhibiting this right and as such acting unconstitutionally. Ceding jurisdiction of our court to foreign courts in matters such as this would be tantamount to ceding our sovereignty a situation our Constitution abhors.

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.

In view of the above I have no difficult in holding that the trial court had jurisdiction to determine the matter. 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.

Universal Pharmacy (K) Limited v Pacific International Lines (PTE) Limited & Kenya Railways Corporation [2015] KEHC 3518 (KLR)

The position adopted by the Court of Appeal in the case of UNITED INDIA INSURANCE CO. LTD (supra) and which I entirely agree with is that Kenyan courts, despite the existence of an exclusive foreign jurisdiction clause in a contract, would assume jurisdiction when the case is filed in Kenya. The said case laid down the circumstances and the factors that the court has to consider in order to determine whether it should assume jurisdiction or not. 

1. The appellant is awarded the costs of this appeal.

United India Insurance Co Ltd v East African Underwriters (Kenya) Ltd [1985] KECA 39 (KLR)

The courts of this country have a discretion to assume jurisdiction over an agreement which is made to be performed in Kenya notwithstanding a clause therein conferring jurisdiction upon the courts of some other country. 

Two of the principles established by the authorities mentioned by Brandon, J in The Eleftheria [1970] p. 94 at p 100 are (a) in exercising its discretion the court should take into account all the circumstances of the particular case; (b) in particular, but without prejudice to (a), the following matters, where they arise, may properly be regarded:- (i) in what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the court of the country and the court of the foreign country. (ii) whether the law of the foreign court applies, and if so, whether it differs from the law of the country in any material respects (iii) with what country either party is connected, and how closely (iv) whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantage (v) 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 unable to enforce any judgment obtained, be faced with a time bar not applicable in their country.

1. The 

Dated signed and delivered at Nairobi this        13^th   day of   December            2024.

B.M. MUSYOKI

JUDGE OF THE HIGH COURT.

Judgment delivered in presence of Mr. Muia for the respondents and Mr. Ojienda for the appellant .