1.Before the court are two applications and the 1st application is a notice of motion dated December 16, 2020 was brought under section 3A of the Civil Procedure Act, order 2 rule 15 (a) of the Civil Procedure Rules and section 6 of the Arbitration Act for the following orders;a.The plaint herein be struck out and this suit be dismissed with costs the defendants.b.In the alternative, this suit be stayed with costs to the defendant as the parties pursue their mandatory dispute resolution processes.c.The costs of this application be provided for.
2.The application was supported by the sworn affidavit of Patricia Njeri Wanjama.
3.The 2nd application is a notice of motion dated December 2, 2020 brought under sections 1A, 1B, 3 and 3A of the Civil Procedure Act and order 51 rule 1 of the Civil Procedure Rules for the following orders;a.The court to order the preservation of all the following known assets belonging to the defendants pending the hearing and determination of this application;
b.Further and in the alternative, the defendants be compelled to deposit in court a sum of Kshs 2, 907,157,616.14 being the amount due as of November 24, 2020 and payable by the defendant to the plaintiff as a security for their appearance before the court pending the hearing and determination of this application.c.In the alternative, the court to order the defendant to deposit in court any other sufficient security to guarantee their appearance before the court pending hearing and determination of this application.d.The 1st and 2nd defendants’ directors be summoned to attend the court for their examination on the 1st and 2nd defendants’ assets and to be compelled to produce all its books of accounts including but not limited to the 1st and 2nd defendants’ annual financial statements.e.The court to issue any other such orders as it may deem fit and just in the circumstances.f.Costs of this application be borne by the defendant.
- Situ village (ololua) erected on plot LR No 5830/7 and LR No 5954/2
- Cytonn Towers erected on plot LR No's 2/85, 2/86 and 2/87
- Applewod erected on plot LR No 1055/29
- Riverrun erected on plot LR No 5910, Ruiru Kiambu
- Taraji erected on plot No Kiambaa/Ruaka/520 Ruaka, Kiambu
4.The application was supported by the sworn affidavit of Backstrom Marko who stated that on the September 2, 2015, the plaintiff advanced a loan facility of Kshs 1,360,783,260.00 to the 1st defendant.
5.Vide a deed of addendum dated March 18, 2016, the plaintiff provided a further facility of Kshs 400, 000, 000 to the 1st defendant. The 1st defendant defaulted in repayment of the outstanding amounts of the said loan facilities despite several letters and a default notice from the plaintiff demanding repayment of the same.
6.Despite debt restructuring made vide the debt restructuring agreement dated October 18, 2018, the 1st defendant defaulted in repayment of the outstanding amounts of Kshs 2, 907,157,616 .14 as of November 24, 2020 to the plaintiff.
7.The plaintiff has a right of lien as against the defendants in respect to all that property known as Situ Village (ololua) erected on plot LR No 5830/7 and LR No 5954/2.
8.The defendants are also the known owners of the following assets:
- Cytonn Towers erected on plot LR No's 2/85, 2/86 and 2/87 Applewod erected on plot LR No 1055/29
- Riverrun erected on plot LR No 5910, Ruiru Kiambu
- Taraji erected on plot No Kiambaa/ruaka/520 Ruaka, Kiambu.
9.The above properties were purchased and developed by the funds advanced by the plaintiff to the defendant herein, a fact well known to the plaintiff by virtue of being the financiers of the said purchase and development.
10.The proprietors of the 2nd defendant are foreign nationals with no known permanent residences and traceable assets in Kenya. Therefore, the plaintiff stands to suffer irreparable loss and damage if the orders sought in this application are not granted.
11.It was the applicant’s case that the court lacks the jurisdiction to entertain and determine the dispute herein, the said loan instrument expressly provides that, should the stipulated structured, amicable negotiated settlement fail in terms of clause 15, all disputes arising out of or in connection with the agreements are to be referred to and finally resolved by arbitration in accordance with clause 16.
12.Such arbitration is to take place under the rules by three arbitrators, to be nominated and appointed as provided therein, in London.
13.Further, clause 14 of the loan instrument, provides that it (i.e the instrument) as well as the notes shall be governed by and construed in accordance with the laws of England. Accordingly, the exclusive jurisdiction and governing law clauses ousts the jurisdiction of the Kenyan courts.
14.It was the respondent’s case that on or about October 18, 2018, the 1st defendant/applicant proposed a debt repayment plan and consequently, the plaintiff/ respondent and the defendants/applicants entered into a debt restructuring agreement for gradual redemption of the obligations owed to the plaintiff/ respondent in the loan documents, (marked as BM-4).
15.At paragraph 11 of the debt restructuring agreement dated October 18, 2018, the law governing the said agreement is the laws of Kenya. Moreover, the said clause provides that parties are to submit irrevocably to the exclusive jurisdiction of the courts of Kenya. The last agreement signed by the parties takes precedence as it is the most recent and reliable reflection of the intentions of the parties.
16.The respondent submitted that jurisdiction is the foundation of every suit. It has to exist when the suit is filed in the first place. A suit filed devoid of jurisdiction is dead on arrival and cannot be remedied. Without jurisdiction, the court cannot confer jurisdiction to itself as the court pronounced in;Owners of the Motor Vessel 'S' v Caltex Oil (Kenya) Ltd, .
17.It was the respondent’s contention that it is a well settled principle in contract law that the last signed agreement signed by the parties takes precedence over earlier ones as it is the most recent and reliable reflection of the intentions of the parties.
18.The previous disputes about the earlier contracts were settled by the parties by entering into the debt restructuring agreement. The action by the parties of entering into this debt restructuring agreement thus abrogated the initial contract and the arbitration clause contained in it.
19.Further, in the case of Ramdas Dwarkadas v Orient Pictures. AIR 1942 Bom 332, the first contract made between the parties contained the arbitration clause. The parties then entered into an arrangement giving rise to new rights and obligations independently of the old contract. It was held that the disputes under the subsequent arrangement could not be dealt with under the arbitration clause of the first contract. In the subsequent arrangement there was no arbitration clause. It was also held in that case that the arbitration clause in the first contract was not broad enough to cover the disputes which arose under the subsequent arrangement.
20.Moreover, the respondent stated that separate searches were conducted over the properties being LR Number 5910 (Orig No 92/ 1), LR Number Title Number Kiambaa Ruaraka/ S20 and LR Number 2/87 which revealed that the defendants herein were the owners of the said parcels of land. The said properties were purchased and developed by the funds advanced to the defendant by the plaintiff a fact well known to the defendants. The plaintiff is apprehensive about the fact that the defendants are foreign nationals with no known permanent residences and traceable assets in Kenya.
21.It was the respondent’s submission that the court should take note that there is an ongoing insolvency cause being Insolvency cause No E063 of 2021. Therefore, the plaintiff is apprehensive about the fact that any orders issued in Insolvency Cause No E063 of 2021 will cause the assets sought to be preserved to be liquidated thereby making it difficult for the plaintiff herein to recover the debt owed to themselves by the defendant.
23.In its conclusion, the respondent submitted that the plaintiff is ready to compromise and have the matter referred to arbitration subject to the subject assets being preserved.
Issues for determination
24.The court had made a determination on the October 21, 2022 on the 1st application on whether the proceedings herein should be stayed and the matter be referred to arbitration; and it had granted the same; therefore after considering the 2nd application, the response and the written submissions, the court has framed the following issue is for determination;a.Whether the court should issue an order the preservation of all the mentioned known assets belonging to the defendants?Analysis
25.The respondent submitted that should the matter be referred to arbitration the subject assets ought to be preserved. The grant of an interim measure of protection is discretionary and the purpose of an order of protection is to preserve assets or in some way maintain the status quo as the parties await the outcome of the arbitral proceedings.
26.Section 7 of the Arbitration Act stipulates as follows:Interim measures by court'(1) It is not incompatible with an arbitration agreement for a party to request from the High Court, before or during arbitral proceedings, an interim measure of protection and for the High Court to grant that measure.(2)Where a party applies to the High Court for an injunction or other interim order and the arbitral tribunal has already ruled on any matter relevant to the application, the High Court shall treat the ruling or any finding of fact made in the course of the ruling as conclusive for the purposes of the application.'
28.On whether the subject matter is under threat it was the applicant’s argument that there is an ongoing insolvency cause being Insolvency Cause No E063 of 2021. The applicant was thus apprehensive about the fact that any orders issued in Insolvency Cause No E063 of 2021 will cause the assets sought to be preserved to be liquidated thereby making it difficult for the plaintiff herein to recover the debt owed to themselves by the defendant.
29.The applicant/plaintiff has a right of lien as against the defendants in respect to all that property known as Situ Village (ololua) erected on plot LR No 5830/7 and LR No 5954/2. which was provided as the Applicant’s security in the charged documents. In light of this, the court grants an interim order of preservation to ensure that the subject matter will be in the same state as it is pending the arbitral proceedings.
Findings and determination
30.For the forgoing reasons this court makes the following findings and determinationsi. This court finds the 2nd application to be partially merited;ii. An interim order of preservation be and is hereby granted over all that property known as Situ Village (ololua) erected on plot LR No 5830/7 and LR No 5954/2to ensure that the subject matter will be in the same state as it is pending the arbitral proceedings.iii. Each party to bear its own costs of this application.Orders accordingly.