IN THE HIGH COURT OF KENYA

          The application before the Court is made by a Notice of Motion dated 7^th April, 2011, and taken out under Section 3A of the Civil Procedure Act; Order 26 Rule 1 of the Civil Procedure Rules; Section 7 (1) of the Arbitration Act and all other enabling provisions of the law. The Applicant thereby prays for orders that:-

The application is supported by the annexed affidavit sworn on 7^th April, 2011, by Hezekiah Mwangi Macharia, the Director of Manufacturing and Human Resources of the Plaintiff Company, and is based on the following grounds:-

Opposing the application the Respondents filed a replying affidavit Sworn on 21^st April, 2011 by Niu Ben Bin, the President (Manufacturing and Supply Chain) of the Defendant Company. In that affidavit, the deponent avers that the suit was instituted after the expiration of the 3 months’ notice. It was therefore overtaken by events and is no longer maintainable as the distribution contracts have already been given out to other distributors. He further avers that the Defendant has not terminated the contract as alleged by the Plaintiff but has only chosen to exercise its right “not to re-new” the contract which right is unfettered and cannot be challenged in any way. Furthermore, “dispute” can only refer to a dispute concerning the performance and administration of the contract when the contract is still in force. 

          Regarding the order for injunction, the principles governing the grant of interlocutory injunctions are firmly ingrained in GIELLA v. CASSMAN BROWN & CO. LTD. [1973] E.A. 358, in which the Court of Appeal observed that :-

“The conditions for the grant of an interlocutory injunction are now well settled in East Africa. First, an applicant must show a prima facie case with a probability of success. Secondly, an interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury, which would not adequately be compensated by an award of damages. Thirdly, if the court is in doubt, it will decide an application on the balance of convenience.”

Regarding the first condition, I note that Article 7 of the distribution agreement made between the parties is very significant in the context of the prayer for injunction. It provides for the duration of the agreement and is couched as follows:-

This Agreement shall come into force on the date first above written and, unless earlier terminated under the terms given in Article 9, remain in force for a period of one (1) year, and shall be automatically renewed and continued year to year unless either party gives to the other notice of non-renewal at least three (3) months before the end of the term then in effect provided that during the initial term of 1 year either party may terminate this Agreement by giving the other a two (2) month’s written notice.”

          As there is an Arbitration Clause in this Agreement, I feel bound to be very economical with my words in respect of matters which might well be a preserve of the Arbitrator. Suffice it to say that according to the above Article, the parties were at liberty to bring to an end the distributorship agreement by complying with the requirements of that Article. Indeed, it is for this reason, I think, that the Respondents contend that they have not terminated the contract as alleged. All they did was to exercise their right not to renew the contract. In my view, I think that the Respondents are, prima facie, in the right inasmuch as the distributorship agreement was terminable and provided that it was terminated in accordance with the provisions of Article 7 (supra). For that reason, I would take the stand that the Respondents have a better case on that issue. Secondly, it is their contention that they have already awarded the distributorship to some third party/parties. Should that be so, it would not be proper for the Court to grant an injunction restraining the Respondents from terminating the distributorship contract and appointing somebody else in the place of the Applicants. Such a request would amount to asking the Court to issue an order in vain. For these reasons, I find that the Applicants have not made out a prima facie case for the grant of a preservation order. 

          If the Applicants had made out such a prima facie case with a probability of success, they would still have to contend with the second condition for the grant of an interlocutory injunction. That condition ordains that an interlocutory injunction will not normally be granted unless the Applicant might otherwise suffer irreparable injury which would not adequately be compensated by an award of damages. In the light of that condition, I note that in the last paragraph of the plaint that the Applicants pray that judgment be entered against the Respondent for –

          Regarding the issue as to whether this matter should or should not be referred to arbitration, I note that Article 13 of the Distribution Agreement between the parties specifically provides for arbitration. It reads as follows:-

In the event of any dispute arising out of or relating to this Agreement or in case of breach thereof the parties shall try in the first instance to arrive at an amicable settlement. Should this fail the dispute or breach shall be referred to and finally settled by arbitration by an arbitrator agreed by the parties. Failing such agreement the arbitrator shall be appointed by the Chairman of the Kenyan Branch of the Chartered Institute of Arbitrators. Such arbitration shall be held in Nairobi in accordance with the Arbitration Act of 1995 as amended from time to time (Cap. 49, Laws of Kenya) and all rules prevailing thereunder. The Arbitrator shall have power to rule on his own competence and on the validity of the Agreement to submit to arbitration. The costs of Arbitration shall be borne by the party against whom the judgment is entered and the ruling of the arbitrator shall be final and binding on both parties.”

I understand it to be the Respondent’s case that this matter should not be referred to arbitration for two reasons. First, it was the intention of the parties that any matters in dispute regarding the agreement between them were to be referred to arbitration during the subsistence of the agreement. Secondly, since the agreement between the parties has already been terminated, there is nothing to be referred to arbitration. It is my humble view that this point in itself falls within the purview of the arbitrators’ jurisdiction and that it ought to be determined by the arbitrator. The Clause referring disputes to arbitration ought to be respected by observance and not in breach. 

“1. In any suit the court may order that security for the whole or any part of the costs of any defendant or third or subsequent party be given by any other party.”

By reason and wholly on account of the foregoing, I find that the application for an interlocutory injunction pending arbitration is not deserved. This matter is accordingly referred to arbitration and the costs of this application shall be costs in the cause.

Orders accordingly.